Like any investment, it’s important to invest only what you can afford to lose. This is doubly true when it comes to crypto, which can see huge drops in value on a daily basis.
Samira Tollo suggests using hardware wallets, which keep private keys offline and are less vulnerable to hackers than online software wallets.
Use a Reputable Exchange
Cryptocurrency exchanges act like brokers, facilitating transactions for a fee. However, unlike brokering companies that trade stocks and bonds, exchanges often don’t have any regulators, so it’s harder to know how safe or trustworthy an exchange is. Additionally, many exchanges store your assets for you, giving them full custody and control of your hard-earned assets. This makes them popular targets for hackers and has led to some exchanges losing large amounts of users’ digital assets. Ada nft drops is one of the examples of a safe and secure NFT blockchain you can buy and sell.
When choosing an exchange, look for one that discloses its business model and security practices on its website. It should also be easy to see who founded the exchange and how long it has been in operation. A short lifespan could be a red flag, as could the presence of glaring security vulnerabilities.
It’s important to make sure that the exchange offers 2FA, which requires you to enter a code from a mobile app or Google Authenticator every time you log in. This prevents attackers from using “forgot password” features to change your password and steal your money. Also, be wary of any exchange that sends 2FA codes via text message; this allows attackers to hijack your phone and intercept the code.
Keep Your Private Keys Safe
Private keys, a string of letters and numbers similar to a password, are critical pieces of information that authorize transactions on the crypto blockchain network. Anyone with this information can spend the associated funds, so keeping it safe is a top priority for any crypto investor.
The best way to keep your private key safe is to back up your wallet. This means writing down your recovery phrase (aka seed phrase), which is usually a long string of words or letters, and hiding it in a secure place. This is important because, whether you use a self-custodial or custodial wallet, every transaction must be digitally signed with your private key to complete. A backup of your private key allows you to access your funds even if you lose or break your device.
Another important thing to remember is to never share your private key or seed phrase with anyone. Providing it to others puts your assets at risk of being stolen, and it could also make you vulnerable to ransomware attacks. In addition, you should avoid using public computers and wifi networks to store your wallet as these are often the targets of hackers. Finally, some investors choose to keep their private keys offline in a safe location like a piece of paper or a computer that isn’t connected to the internet. This is called cold storage, and it offers some protection from hacking but also makes using your crypto more inconvenient.
Keep Your Money in Cold Storage
Whether you’re buying cryptocurrency to spend or as a long-term investment, conventional wisdom dictates that you should keep your funds in “cold storage.” This means keeping them offline and not connected to the internet. This is generally done with a hardware wallet (think specialized USB devices that look like safe deposit boxes) or a software wallet that adds extra steps to transactions to ensure safety and security.
The most secure way to store your cryptocurrency is to purchase a hardware wallet. These are considered cold wallets because they’re not connected to the internet, making them more difficult for hackers to steal from. You can also use a software wallet, though these are not as secure and may be vulnerable to keystroke logging malware or phishing scams.
Another way to stay safe is to check the exchange’s track record and user terms of service before you decide to buy. Look at the cryptocurrencies it offers, fees associated with trading and depositing, and how the platform deals with security breaches. Moreover, make sure to verify your bank account before you deposit money on an exchange; this will help prevent your crypto investments from being stolen by malicious market participants. You can find this option in the deposit or bank account section of the exchange you’re using. Also, remember to save your wallet’s recovery phrase – a long string of randomized words that you’ll need to access your wallet in case it malfunctions or is lost.
Use a Secure Device
Cryptocurrency is essentially money that you can trade person-to-person on the internet without the need for a middleman like a bank or government. It is also highly speculative, and if you don’t take certain precautions, your investments could be lost to hacking or other scams.
The most common way to buy and sell cryptocurrency is through an exchange, which is a secure platform that stores your investments in cold storage. However, if you’d rather provide your own custody of your cryptocurrency, there are several different ways to do so.
Desktop wallets: These are software programs that you download onto your laptop or desktop. They are usually encrypted and designed to make it easy to buy, sell, and transfer digital currency (just be wary of QR code fraud). Mobile wallets: These are software programs that you can install on your smartphone or tablet. They are generally more convenient and allow you to do transactions quickly, but they can be susceptible to cyberattacks if your device is compromised.
Hot wallets: These are web-based apps that offer convenience, but they are also susceptible to cyberattacks. They are typically less expensive to use than desktop and mobile wallets, but they can still be at risk for DDOS attacks and other vulnerabilities. Keeping your investments on an exchange can be risky, so it is always best to back them up with a cold wallet or a paper wallet.
Keep a Long-Term Perspective
If you’re investing in crypto, make sure that you understand your current financial situation and that you have money set aside that you can afford to lose. It’s never wise to risk more than you can afford to lose on any investment. This is especially important in the case of cryptocurrency, which can be very volatile and has no legal protections like credit cards have (e.g. if something goes wrong with a purchase).
It’s also important to remember that the cryptocurrency market is still very young and can have large swings in prices. If you’re a new investor, try to keep your emotions in check and avoid making emotional decisions.
Finally, it’s a good idea to diversify your investments. There are thousands of different cryptocurrencies out there, and it’s impossible to know which ones will be the biggest winners. Instead, choose a few quality coins with solid use cases and spread your investments across them. This will help you hedge against losses and ensure that any one coin doesn’t become a complete dud. It’s also a good idea to diversify your holdings by buying and selling a few times throughout the year. This will help you keep your balance in line and may even give you some small profits. It will also help you avoid making the mistake of panic-selling, which can be a quick way to lose your hard-earned gains.
Don’t Forget About Taxes
Buying and selling crypto can be a lot of fun, but it is important to remember about taxes. The IRS treats cryptocurrency as property, and when you sell or exchange a coin for fiat money or another crypto, you have to report the transaction on your tax return. The IRS also taxes capital gains at different rates depending on how long you hold an asset.
When you buy a crypto, you establish a basis that is the amount you paid for the asset. When you sell it, you compare your sales proceeds to the basis and report the difference as a capital gain or loss. It is important to keep track of your crypto’s basis and sales, as well as the date you sold or exchanged it, in order to avoid overstating your profit or paying too much tax.
Another way to lower your crypto tax bill is to give it away. The IRS allows you to gift up to $16,000 per person, so you can pass on some of your crypto and save on taxes. Just make sure that you don’t buy or sell fake coins that scammers pump up with fake user rates. You should also stay away from wallets that you download from unreliable websites because they could steal your coins with dodgy code.