5 Best Long-term Practices When Investing In Cryptocurrencies

Ever wondered what is the best place to keep your precious assets? If “under the mattress” is not a viable option for you, you’ve probably researched a few options to invest and capitalize on your savings. Apart from traditional banking services, precious metals and stock assets, you’ve probably heard about the advent of the blockchain technology from a member of your family or a friend, or maybe even from the news. Sounds interesting but a lot more complicated than opening a savings account, right?

If you’re confused as to why it may be a good idea to invest in the blockchain technology and cryptocurrencies, and how you can make your first steps without risking your whole investment, keep reading!

Why invest in crypto in the first place?

It’s all about potential and forward-thinking. Traditional financial systems are facing more and more stability problems, not to mention the fact that their security and transparency are being questioned pretty often these days. Blockchain tech might have the answer to these issues and more in the form of cryptocurrencies. While the technical aspects of this new way of thinking about money may sound frightening, once you cover the basics you will see the potential beneath.

If you have already decided to jump in, there are a few ways you can make sure your digital assets are protected and you have control over your investment at any given moment.

What are the dangers?

There are many potential scenarios where you face problems with your investment in traditional assets like stock and precious metals. With cryptocurrencies, there’s also the potential for fraud and theft, but to a lesser degree and certainly not as a result of third-party information breaches, for example. It’s up to you to protect your digital assets and make sure they’re safe. But what exactly are the dangers?

• Having all of your cryptocurrency stolen with no way to retrieve it and no way to trace back to who stole it.
• Losing your ability to access it entirely.
• Losing a significant portion of your investment, sometimes overnight, due to bad strategy.

In order to avoid any of these scenarios, we’ve created a list of best practices you can follow to make sure your digital assets are safe.

5 best practices to protect your digital assets

First of all, what do we mean by “best practices”?

A best practice for long-term investment in cryptocurrency is any combination of strategy and security that ensures long term accessibility with minimized risk of loss. Keeping this in mind, follow along as we share our top five pieces of advice for first-time investors in cryptocurrency.

1. Keep your credentials safe

Losing your entire investment is as easy as losing your private key. All online wallets prompt you to store your back-up keyphrase on paper in a safe place so you can access your account even if you forget your password or have any other trouble logging in. But if you’re not sure online wallets are safe in the first place, you can also opt for a desktop wallet on your own device at home, a hardware wallet you can carry around (like a USB device) or even a paper wallet. The last two options also offer you complete anonymity in transactions. If you’re willing to pay extra, you can even buy physical Bitcoins.

2. Diversify your portfolio

As with traditional stock markets, smart diversification minimises risk. But unlike traditional markets, with cryptocurrencies the correlations between different coins are in most cases positive so it’s more difficult to establish which combination of coins will bring you more stability should one of the coins decrease in value. CoinTelegraph have done a great research on the topic, comparing different combinations based on available statistical data – we strongly advise you have a look at it here.

3. Rebalance your portfolio often

Sometimes an overhyped cryptocurrency can gain popularity for a while but then nosedive suddenly as people lose interest. Multiple times in the past there have been cryptos with a lot of hype around them that were exposed as being either scams or fraudulent projects, decimating their value almost instantly. Make sure the bulk of your investment is always in the strongest and most reliable coins for that week or month. Always stay relevant.

Hackernoon dives into the details and shows you how rebalancing is better than holding on to your preferred coins indefinitely. Check out their analysis here.

4. Maintain a high level of personal security

Never store your trezor in your tinfoil hat!

You wouldn’t expect your money to protect itself if a bank gets robbed, right? And just as bank systems fail, digital security protocols fail sometimes too. The best way to avoid losing all your digital assets is to maintain a high level of protection on all accounts and devices involved. What does this mean?

Begin with your PC or laptop – make sure that it’s malware-free (you may not even know you’ve been hacked). If you have your doubts or just want to be completely sure, re-install your operation system with a secure new one. Keeping your operation system updated is another step to a more secure online experience.

Next up are your passwords. This is probably the most vulnerable area for most people as they tend to either use very simple passwords or use one and the same again and again. If you want to up your password game, start using a password manager and always generate strong and unique passwords for each site.

Using a 2-factor authentication is also a good idea – on all platforms which provide this service.

Finally, we recommend you use a VPN when accessing your digital assets. It’s one more step but can be really helpful to avert hacker attacks.

5. DYOR

This cryptic abbreviation stands for something very very simple – Do Your Own Research. No one can do it for you. No one can protect your investments if you skip research about security measures, for example. Building a strong investment portfolio with cryptocurrencies takes time not only because some coins need time to build momentum, but also because you need to invest time in learning.

So, where do you start?

First, cover the basics – what are blockchain and cryptocurrencies and how do they work? Next, cover the security technicalities mentioned earlier. Then, define your investment goals and start doing a structured research into the coins and markets which can be used to achieve your goals.

You may find certain topics lacking in information and this is normal for a field which is so rapidly changing. Don’t let FOMO guide you, always take your time to discuss on forums or chat rooms the possible implications of a certain action.

How to structure your research? You can find some really useful guidelines in this article, which also suggests a few reliable sources.

Ready to invest?

We hope these best practices will help you navigate the vast and pretty complicated world of cryptocurrency investments. If you’re ready to begin your journey, let us know what are your primary issues and questions below!

Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. The author may have holdings in the cryptocurrencies discussed.