KEEP UP TO DATE WITH ALL THE IMPORTANT COVID-19 INFORMATIONCOVID-19 RESOURCE PORTAL

FANews
FANews
RELATED CATEGORIES
SUB CATEGORIES General |  Currency Hub | 

How to Invest Safely in Digital Assets

26 July 2021 Heath Muchena, Founder and CEO of Proudly Associated
Heath Muchena, Founder and CEO of Proudly Associated

Heath Muchena, Founder and CEO of Proudly Associated

What Every Investor Must Know Before Investing in Cryptocurrencies

Over the past few years, digital assets such as Bitcoin have seen an astonishing increase in popularity. Much of this can be attributed to the growing list of innovative use cases and benefits offered by these virtual currencies and their underlying blockchain technology.

Some of the widespread use cases of popular cryptocurrencies include:

• Bitcoin — Access to fast and secure financial services to all users worldwide.
• Asset-backed tokens — Grant ownership to a real-world physical assets such as gold and real estate.
• Ethereum — Facilitates building and deployment of decentralized applications (DApps).
• Stablecoins — Provide stability in a highly volatile crypto asset markets.
• IOTA — Powering the future of the Internet of Things (IoT).

Despite some digital currencies offering wide ranging use cases, the majority of people still generally view crypto assets as investment vehicles and stores of value. If simply looking at the statistics, cryptocurrencies have appreciated significantly in price over the last few years and investment in them is very attractive to not only retail investors but even large investment managers like Ark Invest are proponents and publicly traded corporations such as MicroStrategy, Tesla and SpaceX now hold Bitcoin on their balance sheets

Bitcoin, the leading cryptocurrency, has maintained an average growth rate of 87% year-on-year since 2015 — over 100% growth in value was recorded between 2020 – 2021. Thus, it is not uncommon to see people buy bitcoin and wait for it to increase in value to make profits.

As the popularity of digital assets increases and they continue to receive significant attention, more people are increasingly getting exposure into the space. New investors are taking the leap by investing in crypto assets, with a lot of people choosing to buy bitcoin and other crypto assets.

However, just like any other investment, crypto investment poses its own set of risks and challenges — and if not careful, investors can lose their money. Many people are investing in crypto without being knowledgeable on how to keep their investments safe.

Before investing in crypto, all investors must have sufficient knowledge on how to keep their investments safe. Take the time to learn the common safety pitfalls and how best to avoid them.

Below are the top must-know tips to start investing safely.

Research Exchanges

Cryptocurrency exchanges are platforms that facilitate crypto trades. They allow customers to trade cryptocurrencies for fiat currencies or other crypto assets. Exchanges are the entry point for crypto investment and it is extremely important to choose the right one when entering the market. Currently, there are over 200 listed crypto exchanges available in today’s market.

When choosing the right crypto exchange, some fundamental features to watch out for include the location of the exchange and the country’s crypto restrictions, ease of use, the exchange services and support, security features, transaction fees, volume, and liquidity, etc.

Make sure you make properly research before choosing an exchange to use. Look into the exchange's history, check whether it has any history of security and financial breaches. Get reviews on the exchange from the community and seek the advice of experienced investors.

Beware of fake crypto exchange platforms. It is recommended to stick to reputable and recognized exchanges. For fast and secure crypto transactions, check out reputable global crypto exchange platforms such as Remitano.

The platform features a host of interesting options that enables smooth crypto transactions. Users can buy bitcoin in South Africa through the peer-to-peer channel, swap with other cryptos, make extra income by investing using the Remitano invest option, and much more.

Remitano – the global peer-to-peer marketplace is also currently developing its native token, RENEC, to improve the quality of services delivered to customers, reduce transaction fees and ensure secure and swift transactions. While RENEC is still in the development phase, Remitano has provided an amazing opportunity for old and new Remitano users to earn FREE RENEC.

Understand the Project

Before diving into a crypto investment, it is highly advisable to take time to understand the crypto asset you are planning to invest your money in. Cryptocurrency projects, just like any other business project aim to solve relevant problems. Crypto projects with sound fundamentals, clear use cases, and realistic goals are likely to thrive in the future. Those types of project are good prospects and have potential to provide a good return on investment.

Carry out detailed and in-depth research on any crypto project before investing in it. Read the project whitepaper, understand its use cases, check what the community is saying about the project — this will give you an idea of the issues or highlight strengths and weaknesses. Check the project’s development activity, the exchanges that the crypto token is listed on to ensure its market is liquid, check the total coin supply, circulating supply, and market capitalization, etc.

Avoid investing based on hype and never invest based on FOMO (fear of missing out). This is no substitute for proper research and sensible assessment of risk potential and an understanding of what you are investing in.

Choose the Right Wallet

So, you have decided on the crypto asset you wish to invest in and you have chosen the right exchange to make the purchase. The next thing is to transfer your holding to a secure wallet for safe storage. Knowing the right crypto wallet is one of the most important steps to guarantee safety on one crypto investment. After you learn how to buy bitcoin, you have to store it in a secure wallet, otherwise, you risk losing your investment to digital theft.

Choosing the right crypto wallet can be a daunting task. There are hundreds of crypto wallets in the market — each with its security features and unique level of safety. The category of wallets available includes hot wallets, cold wallets, software wallets, and hardware wallets.

Choosing a safe and secure wallet is very important and should not be overlooked. Make sure you properly research when deciding on the type of wallet to store your crypto coins. Make sure you know the difference between each category of wallets available, understand their strengths and weaknesses before choosing the most appropriate one for you.

Consider such things as - Is the wallet easy to use? Does it have a backup feature? What are the security features? Is the wallet provider transparent on how they operate? And lastly, is the wallet or provider reputable? All these are fundamental questions to seek answers to before choosing a wallet.

Also, ensure you are protecting yourself from online theft by safeguarding your wallet key and password. Safeguard your wallet by incorporating a two-factor authentication system. Beware of scam mining platforms, fake giveaways, shady ICOs and many other scams. All these make you vulnerable and put you at risk of losing your investment.

Diversify Your Investment

Investment 101 — diversify your investment portfolio. This does not only hold true when it comes to crypto investments but all other asset types.

Cryptocurrencies are inherently volatile, and there is always a potential for a market downtrend. This makes diversification a good investment strategy in crypto. By spreading your investment, you are not only allowing yourself to profit on multiple fronts but also reducing the risk of losing all your money if a particular asset becomes unfavourable.

There are over 1000 crypto projects available in the market – each offering their own unique crypto token. You don’t necessarily need to only buy Bitcoin but can also purchase other assets such as Ethereum. Do not put all your eggs in one basket! Instead, hedge your bets through diversification. This will help mitigate the risk of digital currency investing.

Do ensure you do in-depth and detailed research on the assets you wish to invest in. With proper fundamental and technical analysis, you can find some good crypto projects with great prospects.

Understand Your Risk Tolerance

While there is no definite rule on the amount to invest in cryptocurrency, it is recommended that you always invest what you can afford to lose. In crypto investment, you win some and lose some. With this in mind, always invest within your limits. Understand your risk tolerance and invest accordingly.

By allocating investments in alignment with your risk tolerance, you are potentially mitigating losses.

What is the future of crypto trading in South Africa? Find out if crypto will gain more popularity or be subjected to stricter regulations by the South African government.

Quick Polls

QUESTION

Do you believe this is the toughest period for financial advice in many years?

ANSWER

Yes, it’s hard to navigate the challenges and difficult to adapt. I’m struggling.
No, I have managed to navigate the challenges and have adapted. I’m good.
50/50. I just feel like whether we like it or not, we have to ready ourselves for change… be resilient and scale for the future. It’s not about survival of the fittest anymore but survival of the quickest. We just have to move on with life.
fanews magazine
FAnews October 2021 Get the latest issue of FAnews

This month's headlines

IFA nuggets: Prospecting for clients
FSCA weighs in as universal life policy premiums rocket
No short cuts for the short term broker
Investment lessons worth sharing
Tightening of policy wordings… likely in the future?
Subscribe now