Crypto and risks are almost synonymous with each other! In this article, we discuss the biggest risks & dangers of investing in cryptos at Bitvavo.
Risk of price loss
Cryptocurrencies are very volatile: rises and falls of tens of percent per week are the order of the day. When you invest money in cryptos, there’s always the risk of price loss.
Sometimes, cryptocurrencies have no reason to exist at all. When this is the case, a crypto can easily drop to 0 euro and become worthless. It is therefore important to investigate the plan behind a crypto. This reduces the chance of losing your entire investment.
You can also reduce the risk of price loss by applying smart strategies. By investing in ten or more different cryptos, you reduce the influence of one specific crypto on your results. When one crypto is performing poorly, another well-performing crypto can compensate for the loss.
Moreover, by entering at different moments, you reduce the effect of price fluctuations on your results. After all, you then buy cryptos at both low and high prices, allowing you to achieve an average return.
Risk of hacks
Another danger of investing with Bitvavo, are hacks. Hackers and other malicious parties are constantly looking for ways to hack your account. Fortunately, Bitvavo does everything in its power to stop them. However, you can never completely exclude the risk of a hack and losing your crypto.
In any case, it is important to set up a good security system. By choosing a strong password and protecting your account with 2-FA authentication, you make it a lot harder for third parties to gain access to your account.
It can also be smart to store some of your cryptos in cold wallets. A cold wallet is not connected to the internet, making it much harder for hackers to steal your crypto. In this article you can read how Bitvavo’s wallets work.
The best way to limit your risk is to make a good plan. Determine in advance how much money you can spare. Investing in crypto is very risky, and it is not wise to do so with money you will need soon. For example, I only invest a few percent of my assets in cryptos.
Naivety is the enemy of anyone who wants to become successful with cryptos. Remember, 70% of retail investors lose money with crypto, even though the price has only skyrocketed since its launch.