Cryptocurrency can be a risky but rewarding investment, with currencies like Bitcoin and Ethereum seeing massive returns last year.
Many people around the world have bought cryptocurrency in hopes of cashing in on the large price increases.
If you are invested in the cryptocurrency market, there are a few things you should do to improve your experience and ensure the security of your digital funds.
Whether you invested to get in on Bitcoin’s meteoric rise or because you are interested in the tech behind a certain cryptocurrency, you should take some time to learn the basics of blockchain technology.
Blockchains are different to conventional financial systems and offer absolute control to cryptocurrency owners.
Many newcomers without basic knowledge of the underlying technology can fall prey to scams and costly mistakes, losing all of their digital funds.
While you don’t need to be an expert on cryptography or blockchain technology, understanding basic concepts like digital signatures, public and private keys, transaction fees, and block confirmations should prevent you from making any mistakes with your currency.
Get a secure wallet
After learning more about blockchains and public-private key sets, you should realise that holding the private key to your own wallet grants you greater control than storing your funds on an exchange.
Many first-time investors will store their cryptocurrency in the same exchange account where they purchased it (such as the wallets provided by Luno).
While this is convenient, long-term investors who do not need the ability to quickly sell their crypto for fiat should hold the private key to their own funds.
The reasons for this are numerous and include the ability to recover funds gained from hard forks, lack of reliance on third-party systems, and no imposed transfer fees.
Using a wallet service which allows you to hold your own keys is highly-recommended for security, and hardware wallets are an even more secure option for long-term investment.
Secure your private keys
By using your own wallet and holding your own private key, you are directly and solely responsible for the security of your funds.
Many wallet services, whether online or offline, allow you to set up secure logins based on a secure password or PIN used in conjuction with a hardware key or wallet data file.
This offers an extended layer of security and allows you to lock your private key in “cold storage”, safe from online attacks and protected from physical access by a physical lock.
This may seem excessive, but your private key is the single point of failure in the otherwise “unhackable” blockchain architecture.
By securing your private key properly, your funds are immune to manipulation by anybody but yourself.
Like your wallet, it is important to keep your exchange account secure, especially if you keep funds stored on an exchange for an extended period of time.
Using standard online security methods like two-factor authentication paired with a strong, unique password is a good idea.
Be sure to use reputable exchanges with high trading volumes that do not overcharge for trading fees.
If you do not wish to move your funds through a new exchange account, you can always use a service like ShapeShift to convert your cryptocurrency without manually buying and selling tokens.
Monitor your portfolio
Tracking your cryptocurrency growth on CoinMarketCap or an online wallet like Luno is useful, but there are easier ways to stay updated on your portfolio’s price.
Portfolio-monitoring smartphone apps like Blockfolio allow you to input your holding amounts and update them after making trades.
The application will monitor your holdings in the currency of your choosing and will display overall and per-coin gains/losses.
These applications often included the ability to add price alerts, warning you when your cryptocurrency value falls below or rises above a certain price.
It is important to note that portfolio monitoring apps, wallet services, and exchanges are third-party applications and users should conduct their own research and security inspection before using any of these platforms.