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THERE ARE SOME SAFE WAYS TO INVEST IN WITHOUT LOSING CRYPTO-CURRENCY MONEY

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Is cryptocurrency safe? How to Safely Invest in Cryptocurrencies - N26

Is cryptocurrency safe? Things to be aware of
Cryptocurrencies can be safer than other types of currency and riskier in others. Before buying or selling cryptocurrency, you should be aware of potential scams and other pitfalls to watch out for.

10 min reading
The following statements do not constitute investment advice or any other advice regarding financial services, financial instruments, financial products or digital assets. They are intended to provide general information. The following statements do not constitute an offer to enter into a contract for the purchase or sale of financial instruments and financial products, or an invitation to make such an offer and to purchase or sell any particular digital asset. Cryptocurrencies are subject to large fluctuations in value. A decrease in value or total loss is possible at any time. Losing access to data and passwords can also lead to total loss.

Is cryptocurrency safe? It's a legitimate question, given the recent surge in cryptocurrency trading and governments' efforts to keep up with consistent regulation. Cryptocurrency security – or the lack thereof – is likely to continue to be a more pressing issue in the coming years, as a recent report by Allied Market Research projects that the global cryptocurrency market will more than triple by 2030.

The answer to how secure crypto actually is, at least for now, is complicated. Yes, cryptocurrency comes with certain security risks that you should be aware of before making your first trade. First, cryptocurrencies are still an extremely volatile asset class that is prone to rollercoaster price swings. Second, this relatively newβ€”and relatively unregulatedβ€”financial ecosystem comes with its share of scammers looking to prey on unsuspecting newcomers.

But cryptocurrency has some security benefits that make it attractive as well. In this article, we will look at the main security points you should know before diving deeper into cryptocurrencies.

Is Cryptocurrency Safe - And How Can You Invest It Safely?
When someone asks if buying and selling cryptocurrency is safe, they can ask themselves one of two questions:

Are cryptocurrencies a risky investment that could quickly drop in value?
Does cryptocurrency have security risks that could lead to money being lost through fraud or some other type of fraud?
Since these are fundamentally different questions, we will deal with each of them individually.

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Is cryptocurrency a safe investment?
Compared to other asset classes such as stocks and government bonds, investing in cryptocurrency can be considered very risky.

While cryptocurrencies are generally considered legal throughout Europe, many aspects of cryptocurrencies remain unregulated – or may be subject to changing regulations. Fluctuating regulations are part of what can make crypto markets more vulnerable to volatility – as we saw in the summer of 2021, when China's crackdown on crypto-related activities coincided with a drop in the price of Bitcoin. With so many world governments considering how to respond to the rise of cryptocurrencies, there are many factors that could contribute to cryptocurrency volatility moving forward.

Another part of the general volatility of cryptocurrencies comes from the fact that they are still relatively new and investors may not know exactly what to make of them yet. Because cryptocurrency does not have the same historical evidence as other asset classes such as stocks, it can be more susceptible to the large price swings that come with changing investor sentiment. Some cryptocurrencies are more prone to this than others, but even Bitcoin, the oldest and largest crypto by market capitalization, is known for its alarming price swings.

If you invest in cryptocurrency, you can mitigate your risk by not buying more than you can afford to lose. There is still a non-zero chance that the value of any crypto asset will plummet on any given day, so be careful and consider a diversified portfolio of investments where crypto plays a smaller and more speculative role.

Are there security risks associated with cryptocurrency?
Yes, there are some security risks you should be aware of. Here we break them down.

Payment with cryptocurrencies has limited legal protection. Traditional debit and credit card payments offer certain security features that cryptocurrencies do not. For example, in some cases you may not be liable for fraudulent purchases made on your behalf. This is generally not the case with cryptocurrencies. If you lose your money to a scammer, you may have no real way to get it back.
Cryptocurrency scams are common. You may have already received an email threatening to reveal compromising photos of yourself unless you pay a certain amount in bitcoins. Or maybe you received a suspicious message congratulating you on winning a rare NFT or a major cryptocurrency bank. These are just a few examples of scams to watch out for. In general, if someone asks you to pay them in cryptocurrency and refuses other types of payment, they may be trying to steal your money. And if someone is pressuring you to pay with cryptocurrencies in another way, there is a high probability that they are trying to scam you.
You cannot "take back" a cryptocurrency transaction. Many cryptocurrencies use blockchain technology to create a secure, public and immutable ledger of transactions. This technology comes with security benefits, but it also means that crypto transactions generally cannot be modified or reversed. If you're paying someone with cryptocurrency, there's usually no customer service representative you can call to process a refund if things go sour.
These are just a few of the security risks associated with cryptocurrency, but there are ​​​​​​​​others that continue to emerge as the crypto ecosystem evolves. The US Federal Trade Commission updates its information on crypto fraud and security as it develops, so it may be a good idea to check it regularly.

What is the safest way to buy cryptocurrency?
With the rise of cryptocurrencies, there has been a similar increase in the number of online exchanges and marketplaces where users can buy and sell cryptocurrencies. As a general rule, safer online platforms usually require you to prove your identity as they follow Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines.

Many popular crypto exchanges, such as Coinbase, require customers to verify information about themselves before they can access certain trading features. If you're just starting out in the crypto world, it's generally a good idea to go to an exchange or marketplace that takes security seriously and implements these types of steps to verify your identity.

At N26, your safety is our top priority. You can read more about the security measures we put in place to protect all your transactions.

What is the safest way to buy cryptocurrency?
With the rise of cryptocurrencies, there has been a similar increase in the number of online exchanges and marketplaces where users can buy and sell cryptocurrencies. As a general rule, safer online platforms usually require you to prove your identity as they follow Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines.

Many popular crypto exchanges, such as Coinbase, require customers to verify information about themselves before they can access certain trading features. If you're just starting out in the crypto world, it's generally a good idea to go to an exchange or marketplace that takes security seriously and implements these types of steps to verify your identity.

At N26, your safety is our top priority. You can read more about the security measures we put in place to protect all your transactions.

What is the safest way to store cryptocurrencies?
Generally speaking, the safest way to keep cryptocurrency is to keep it offline and out of the reach of those who might have an internet connection. You can keep your cryptocurrency offline if you use a hardware wallet - also known as a "cold wallet" or "cold storage". Digital wallets (ie "hot wallets") that may be online or on your computer may be more vulnerable to theft by hackers.

There are different types of crypto wallets to choose from, including hardware wallets offered by well-known names like Ledger and Trezor. The downside to hardware wallets is that they can be pretty expensive and you'll need a recovery source to regain access to your cryptocurrency if you lose or freeze your wallet. Still, they're probably the safest option at the moment.

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What is the safest cryptocurrency?
Simply put - there is no "safest" cryptocurrency. That's not to say that some cryptocurrencies aren't arguably safer than others. Cryptocurrencies like Bitcoin and Ethereum are said to have some inherent security features due to the use of decentralized blockchain technology, and the wider adoption of these cryptocurrencies (compared to other so-called "altcoins") may make them less prone to massive price swings.

It is worth noting here that security is part of the appeal of decentralized blockchain technology. Bitcoin itself was created to give buyers and sellers more security in their transactions and avoid the need for a trusted third party. To read more about blockchain and security, check out our guide to blockchain technology.

5 Cryptocurrency Risks to Consider Before Investing
Before buying or selling cryptocurrency, it is worth understanding some of the key risks of cryptocurrency. Here are 5 points worth considering:

  1. Blockchain technology is still relatively new The cryptographic nature of the blockchainβ€”as well as the decentralized peer-to-peer network that verifies transactionsβ€”provides some inherent security features. For example, the use of encryption using hashes and timestamps makes it virtually impossible to change the data in a block once it is added to the blockchain.

However, decentralized blockchain technology is still relatively new and we are still figuring out how to best use and regulate it. Meanwhile, some criminals have been able to take advantage of the anonymity that cryptocurrencies offer to fraudulent users, who may have little chance of recovering their assets.

  1. Cryptocurrency is an extremely volatile investment
    Cryptocurrencies tend to be volatile investments, so don't be surprised if their value goes up or down by very significant amounts. In fact, they have been known to rise and fall by double-digit percentages within hours. Past performance is not a good indicator of future performance when it comes to any risky investment – ​​and that certainly includes cryptocurrencies. All this said, you shouldn't invest more than you can afford to lose.

  2. Cryptocurrency scams are a growing problem
    Unfortunately, the cryptocurrency world is flooded with scams. Criminals can use fake apps, crypto wallets, and emails to trick you into giving up your private keys and giving them access to your crypto assets. NFT scams are also increasingly common, with some buyers being duped by fake accounts with fake names or promised royalties that never materialize.

Cryptocurrencies themselves can also be quite fraudulent in nature. This was the case with the Squid Game token, which had a built-in mechanism that prevented many holders from reselling their tokens.

  1. Cryptocurrencies are still largely unregulated Despite some moves around the world to regulate cryptocurrencies, they remain less regulated than many other asset classes. If the platform that exchanges or holds your cryptoassets goes bankrupt, there is a risk that you could lose all your capital. Similarly, your assets could be at risk if the exchange that holds your crypto is attacked by criminals.

Additionally, cryptocurrency taxation is in its infancy and future changes could have implications for your investments.

  1. Diversity is key There are thousands of cryptocurrencies and many of them are still in the early stages of development. It's still hard to tell the ultimate winners from the losers.

As with risky investments in general, it's never a good idea to put all your eggs in one basket. If you decide to invest in cryptocurrency, it might be better to spread your investment across different cryptocurrencies.

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3 Tips to Keep Your Cryptocurrency Safe
A cautious approach can help you avoid some of the dangers most commonly associated with cryptocurrency. Here are our top tips for avoiding the pitfalls.

  1. Research any exchange before buying cryptocurrencies.
    In the past, some cryptocurrency exchanges have been subject to malicious hacker attacks. Consider choosing an exchange with strong security features as well as low fees and ease of use. Before you make a transaction, do some research on the exchange and try to find out what users are saying about it.

  2. Research cryptocurrencies before investing in them.
    Read the cryptocurrency white paper. This document is a standard for every new currency and is designed to help you understand the use cases and scalability of the cryptocurrency and the creators' plans for the future. You can also join an online cryptocurrency forum for ideas and tips to supplement your own research. Internet searches can also provide useful information about the history and reputation of a cryptocurrency.

  3. Store most of your crypto in a secure crypto wallet.
    Keeping most of your crypto in a secure wallet should give you some protection against theft. Using a hardware "cold" wallet can mitigate the risk of losing cryptocurrency due to an online hack.

What else should I know about cryptocurrency?
It's best to have a good understanding of cryptocurrency before buying, so check out our beginner's guide to cryptocurrency for more information. Cryptos are a relatively new phenomenon, so there is still much to learn – including the pros and cons of crypto wallets, NFTs, and blockchain technology itself.

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