In 2022, FTX went bankrupt. As a result, many investors are wondering whether it makes sense to invest in digital currencies in 2024.
We firmly believe that the cryptocurrency market will continue developing, and this year it will get a second wind. However, it is worth being vigilant and studying all information about crypto projects and funds. The website chainbroker.io/projects will help you with this. The data is updated almost in real-time, so you will be aware of all events.
As you have already understood, investing in digital currencies in 2024 is possible and even necessary.
Assess the Risks And Think About How to Avoid Them
Regulators such as FINRA and consumer protection agencies like the Consumer Federation of America have raised concerns about the potential for fraud and mismanagement in the cryptocurrency industry. Recent allegations involving some of the leading figures in the space have demonstrated that these concerns are not unfounded.
It is essential for investors to exercise caution and due diligence when navigating the world of cryptocurrency, as the lack of regulatory oversight and the decentralized nature of the industry can create vulnerabilities for fraud and other illicit activities.
While the cryptocurrency market presents significant opportunities for growth and innovation, investors must be vigilant and informed to protect themselves against potential risks.
According to the CFP, the following risks in the crypto sphere can be identified:
Difficulty in the objective evaluation of assets
Custodial risks
Illegal assets and providers that violate the law
Rapidly changing rules
Before you start your journey into the world of cryptocurrency, analyze these risks and think about how you can reduce them for yourself. Here are some tips we can give you:
Diversify your crypto portfolio
Choose a creditable exchange
Use cold storage
Do basic research on digital assets
Keep an eye on the news
Below we will talk more about each of the ways to minimize the risks. Read attentively!
Diversify Your Crypto Portfolio
One of the mistakes beginners often make is to focus only on one cryptocurrency. It may be at its peak right now, but tomorrow the situation could change dramatically. Diversification can be done according to the following criteria:
Asset classes, each with unique features and benefits. For instance, Bitcoin and Litecoin serve as means of exchange and are classified as payment cryptocurrencies, while Filecoin and Binance Coin are utility tokens. Tether, on the other hand, is a stablecoin that is pegged to the value of a fiat currency and is thus considered a stackable token.
Non-fungible tokens (NFTs) have also emerged as a popular asset class, providing unique opportunities for investors to purchase one-of-a-kind digital assets. By allocating investments to different asset classes, investors can diversify their portfolios and spread their risks effectively. This approach can help to manage risks, ensuring that investments are well-balanced and well-positioned for long-term growth.
Use cases. Cryptocurrencies serve various purposes and are designed to support different applications. For example, ETH is the native currency of the Ethereum network and is primarily used to facilitate smart contracts and the creation of decentralized applications. In contrast, other cryptocurrencies are designed explicitly for use in decentralized finance, the Internet of Things, supply chain management, and other specialized fields. The diversity of cryptocurrencies reflects the unique needs and requirements of different industries and use cases.
Location. Crypto inventors from all over the world are working on innovative projects in the blockchain space. By diversifying the geographic location of these projects, investors can minimize the risks associated with a particular region. This approach can help to ensure that investments are well-protected against geopolitical risks, such as changes in regulations or political instability.
Choose a Credible Exchange
Custodial risks and unreliable suppliers are a huge problem. Investors have the opportunity to mitigate these risks by working with liquid and reliable exchanges. Read ratings, reviews, and information on the Web. We will not claim that this option will give you 100% protection. Remember the example of FTX, which went bankrupt in a matter of days. However, there is much less risk that way.
Use Cold Storage
Cold storage is a strategy to mitigate custodial risk in managing cryptocurrencies. It involves storing digital assets in offline wallets, which are considered to be more secure than online or hot wallets. This method is particularly suitable for investors who do not need to buy and sell cryptocurrencies frequently. They can transfer their crypto assets to a cold wallet after purchase, and move them back to a hot wallet when they want to make a transaction. This approach can help to minimize the risk of theft or loss of funds due to hacking or other security breaches associated with online wallets.
Do Basic Research on Digital Assets
In the realm of cryptocurrency investment, a crucial inquiry to make regarding an asset is: What is the underlying value it offers? Though short-term price fluctuations may be influenced by market speculation, it is ultimately the fundamental value that a token delivers that will dictate its long-term price trajectory.
Keep an Eye on the News
Forewarned is forearmed. Stay tuned to the official media and other sites for more news. Maybe you can find a new cryptocurrency to invest in from the one you once chose.
