Like any investment, there's a risk of loss when you invest in cryptocurrency. But betting on the wrong one isn't the only way it could all go wrong. Here's a look at four ways to invest in cryptocurrency how you lose money in crypto, and how to protect yourself from that risks.
1. Investing in the wrong cryptocurrency
Don't just jump onto the hype and buy whatever's on a hot streak right now, or whichever coin has the best memes. That's a dangerous way to choose your investments because when the social media hype moves on to something else, you could lose a lot of money.
how to protect
It's difficult to predict which cryptocurrencies, if any, are going to stand the test of time and which will fall by the wayside. But you'll have better chances of picking a winner if you research each coin you're interested in. Try to understand what distinguishes it from Bitcoin and what applications it could be used for.
2. Cryptocurrency scams
With so many people interested in cryptocurrency right now, it's easy for scammers to blend in with the crowd. Some promise to offer insider investing tips. Others pretend to be a government agent or a celebrity, like Elon Musk, offering to give you money if you send cryptocurrency. There's a variety of tactics, but they all end the same way: Your cryptocurrency's gone and you get nothing in return.
how to protect
Be suspicious of anyone who tells you they can make you a fortune if you give them your cryptocurrency to invest, and stay away from companies that insist on being paid in cryptocurrency.
3. Hackers
Because cryptocurrencies are stored in digital wallets and all transactions occur online, hackers can sometimes get hold of other people's cryptocurrency, despite the security measures in place to prevent this.
how to protect
You have to be proactive if you want to keep your cryptocurrency safe. That means avoiding scams and only working with legitimate cryptocurrency exchanges. Research the exchange's security to see how it protects your money and ensure you're comfortable with it. Compare it with other popular exchanges before you decide which one you want to invest with.
You could also consider storing your cryptocurrency in an offline (or "cold") wallet, although you open yourself up to the possibility of physical theft if you leave it lying around.
4. Password loss
If you lose the password to your cold wallet, you could lose access to your cryptocurrency permanently, even if you've got the wallet right in front of you. If you have a hot wallet -- one that's connected to the internet -- then you might have to worry about other people holding on to their passwords.
how to protect
It's up to you to decide where you feel more comfortable storing your cryptocurrency but understand the pros and cons of each approach. If you use a cold wallet, memorize or keep your list of passwords somewhere secure, along with your wallet, where others won' t find it.
You'll never be able to take all the risk out of cryptocurrency, but by following the tips in this "How You Lose Money In Crypto, And How To Protect Yourself From That Risks" article, you can reduce your odds of loss somewhat.
