How to Invest in Crypto Sensibly

Introduction 

Investing in cryptocurrencies can be risky - you could lose everything you put in. To invest in crypto safely, you need to approach it carefully, follow key security practices and make smart, informed financial decisions. 

Checklist before Investing 

Start with Research (DYOR)

The phrase "Do Your Own Research" (DYOR) is common in the crypto community, and it’s the most important step before investing. Each cryptocurrency has its own purpose, risks, team and community backing it. Spend time understanding the basics—such as the project’s goals, the technology behind it, the team leading it, the community and market trends. Avoid investing in anything you don’t understand or that seems too good to be true; many scams promise guaranteed high returns, which is a major red flag. 

Only Invest What You Can Afford to Lose

Cryptocurrencies are known for their volatility—prices can soar or crash within days or even hours. It’s crucial to only invest money that you are prepared to lose. Unlike traditional investments, the crypto market can be unpredictable, so it's important not to invest money you need for essential expenses like rent, bills or emergency funds.

Choice of Exchange 

Start by using a well-known, reputable cryptocurrency exchange like Archax. As a UK  cryptoasset registered exchange, Archax offers an environment for both institutional and retail investors, with security measures in place, user support and insolvency remote custody solutions. Avoid using lesser-known exchanges without proper research, as they may lack security features or, in the worst cases, might be scams themselves. 

Enable Multifactor Authentication (MFA) 

For any crypto exchange or wallet you use, always enable MFA, sometimes also called Two Step Authentication (2FA). MFA typically involves something you know (your password) and something you have (a code from your phone that expires), making it much harder for someone to access your account even if they somehow discover your password. 

Secure Your Assets with a Wallet 

After buying crypto on an exchange, the best options are to consider moving your assets to a private wallet, especially if you plan on holding them long-term or use a FCA registered custodian such as Archax. Please note: crypto is not regulated by the FCA in the UK. 

• Hot Wallets 
  Good for frequent trading and small amounts of crypto. These are software-based and connected to the internet, making them convenient but more vulnerable to hacking. 
• Cold Wallets 
  Hardware wallets, like Ledger or Trezor, are great for storing larger amounts of crypto securely because they are offline. Cold wallets are one of the best defences against hacking and should be considered if you're holding valuable assets for the long haul. However, if you lose the seed phrase connected to your wallet, you could lose access to your crypto for good. 

Read more on Crypto Wallets here: 

Setting Up a Wallet & Basic Transactions

Diversify Your Investments 

Diversifying your investments in both traditional finance and crypto is important. If you go all-in on one project or company, no matter how confident you might be, things can go wrong. Spreading the risk by spreading your own investments is good risk management because it your overall risk because if one investment performs poorly, the others might balance it out – just make sure to do your research before you buy. 

Beware of Scams 

Crypto is attractive to scammers because transactions are irreversible. Be cautious of unsolicited offers, promises of guaranteed returns or people trying to get you to invest in new coins. Phishing scams—fake emails or websites that look like real exchanges—are also common. Always verify URLs, avoid clicking on suspicious links and never share your private keys or seed phrases. 

Monitor and Stay Informed 

Crypto markets move fast. By staying up-to-date with industry trends and regulatory changes, you can make better decisions about when to buy, sell or hold. However, it’s important to manage emotions—panic selling or impulsive buying due to market swings can lead to unnecessary losses or regrets! 

To Sum It Up 

To invest in crypto safely, always start by researching each project, only invest what you can afford to lose. Secure your assets with a custodian or in a wallet, preferably a cold wallet for long-term holdings, and diversify your investments to manage risk. Be vigilant for scams, use MFA, and avoid making emotional decisions based on short-term market movements.