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“I want to invest in crypto though I’m scared as I don’t properly understand the risks, can I ever be 100% safe when using Crypto?”.
The short answer is no.
Just like carrying cash, or perhaps choosing to keep cash in your house, it is never 100% safe, to do nor is it practical. This is why we use banks to store money. It is commonly accepted this practice reduces the chance of someone else stealing money from you. The general reputation of a particular bank or financial institution is usually enough to entice customers through their doors. However keeping your money in the bank can also come with risks.
If you look at it this way, every day we somewhat gamble with our money without realising. We take jobs, trusting the employer will pay us for our time and finished work after completing it. We also regularly use new payment systems to automate customer and employee payments digitally and additionally we blindly enter our credit card numbers into multiple websites with the hope the site is legitimate. We have slowly learned to paddle in these cloudy waters, and we have mostly learned how to mitigate risk. In the past, most of us assumed that the hefty fees charged by banks and financial institutions would maintain our financial security and perhaps further incentivise ethical financial practices. The modern investor however, generally understands that financial risk is a hydra with many heads.
The 2008 global financial crisis was a rude wake up call, especially to those who saved their every penny in investment banks, dodgy hedge funds or perhaps put all of their capitol into subprime mortgages or a single stock. An uncountable number of people lost everything, their homes, all their savings and any small chance of a comfortable future. Of course over time a lot of investments recovered however, the sad reality is many just didn’t. After the dust settled, it eventually came to light there were many complex market forces at work taking advantage of gaps in regulation and most people had little to no way to predict the inevitable crash. Even some of the most secure hedge funds and banking institutions were not immune to the scale of financial threat that crept up.
If you are interested, the 2015 movie blockbuster ‘The big short’ does a very entertaining job of highlighting the issues that lead up to the crisis and more interestingly how a small group benefited from seeing the trend ahead of time. It’s entirely worth the watch. Either way, you understand where I am going with this poimt, your overall financial safety is never absolutely guaranteed.
The fallout from the crisis is still being felt over a decade later, yet there are of course some good lessons and ideas that have emanated as a result. For example, people are generally now less inclined to keep ‘all their eggs in one basket’ and investors now understand that some of our most trusted banking institutions still seem to take some eyebrow raising risks with their customers money. Conversely though, in many ways big banks are now more restricted in how they can move your liquid cash around and better policies have been put in place to discourage history from repeating itself. Entrusting your money to anyone comes with its risks and unforeseen market forces can emanate quickly from regular issues such as trade bans, civil unrest, and bad economic policies.
Crypto currencies are still, for the most part, in their infancy, many exchanges and competing coins are still finding their feet and have a fair way to go in terms of earning trust from new customers and potential investors. Crypto is not immune to the aforementioned issues in our traditional financial markets. Sometimes investing in a coin is certainly more risky if you don’t know what you are doing or don’t entirely understand the risks or traps ahead of you. The best advice I would be comfortable giving you at the beginning of your journey is to start super simple. Research topics of interest one at a time to try to wrap your head around it as in the beginning the flood of information can feel like you are drinking from a firehose. You’ll need a little patience if you are someone who wants to focus on their security first, and a little bit of work in this area up front can go a long way further down the line.
For a complete amateur crypto investor, it may be an idea to take advantage of the ‘learn as you earn trend’, as many exchanges, wallets and new coins understand the large knowledge gap that exists. Currently many places are paying participants in crypto to learn how to use their coin or currency tool. Before you go too far though. I would suggest making a new encrypted email which is not linked to any other account you currently use in order to avoid hacks or identity theft from any potentially shonky sites you sign up to. Make sure you keep your password long, accessible (don’t lose it) or in the event you do lose it, have 2FA active. I personally prefer old pen to paper methods over new solutions, however 2FA is handy for making multiple new crypto associated accounts as it does a lot of the legwork for you. Although, like everything 2FA is not 100% risk free.
Over the next few weeks I am going to be writing a series of articles to help encourage new digital investors to put their security first before deciding to jump in the deep waters without knowing how to swim. I’ll be covering blockchain technology, competing and failed coins, exchanges, wallets, metaverse games, News, NFT markets and generally any safety tips I may stumble upon. Be patient, try not to get caught up in the hype before you have a grasp on what you are investing in and remember don’t put all your eggs in one basket.
