Cryptocurrencies are typically based on blockchain technology, which describes a way of recording transactions in time-stamped blocks. This is a rather complex technical process, which results in a digital ledger of cryptocurrency transactions that is sufficiently resistant to hacking.
Additionally, two-factor authentication is required to complete transactions. For example, you may be required to enter a username and password to begin a transaction. You may then have to enter an authentication code sent as a text message to your mobile phone.
However, all these security measures do not exclude the possibility of cryptocurrencies being hacked. Several major hacks have cost cryptocurrency startups dearly. The two biggest cryptocurrency hacks of 2018 were the $534 million Coincheck crypto wallet and the $195 million BitGrail crypto exchange.
Unlike government-backed money, the value of virtual currencies is entirely determined by supply and demand. This can cause sharp fluctuations that can result in significant gains or significant losses for investors. In addition, investments in cryptocurrency are subject to much less regulatory protection than traditional financial products such as stocks, bonds and mutual funds.
Recommendations for safe investing in cryptocurrency
According to Consumer Reports, all investments involve risk, but a number of experts consider cryptocurrency to be one of the riskiest investment options. If you are considering investing in cryptocurrencies, the following tips will help you make an informed choice.
Analyze existing exchanges
Before you start investing, learn as much as you can about cryptocurrency exchanges. It is estimated that there are over 500 exchanges. To get started, do your analysis, read reviews and consult with more experienced investors.
Learn how to store digital currency
The purchased cryptocurrency can be stored either on an exchange or in a digital wallet. There are different types of wallets, each of them has its own advantages, technical requirements and level of security. As with exchanges, it's a good idea to explore different cryptocurrency storage options before you start investing.
Diversify your investments
Diversification is the key to a successful investment strategy. This is also true for cryptocurrency investments. For example, you shouldn't invest everything in Bitcoin just because it's a popular name. There are thousands of investment options, and it's best to spread your funds across multiple currencies.
Be prepared for high volatility
The cryptocurrency market is very volatile, so be prepared for sharp fluctuations in currency prices. If your investment portfolio or mental well-being cannot withstand such fluctuations, cryptocurrency may not be the best choice.
Cryptocurrency is currently in vogue, but the cryptocurrency market is still in its infancy, and the currency itself is considered highly speculative. Investing in something new often comes with challenges, so be prepared, do your research, and invest conservatively in the early stages.
One of the best ways to stay safe online is to use a comprehensive antivirus solution. Kaspersky Internet Security will help protect against malware, spyware, data theft, and also ensure the security of online payments using strong encryption.
