How To Safely Invest in Cryptocurrencies

Unfortunately, this year we have seen countless liquidity crises in the cryptocurrency space. Giants in the cryptocurrency space, like Celsius, TerraLuna, Three Arrows Capital, Voyager Digital, BlockFi, and now even FTX and Alameda Research have become insolvent and declared bankruptcy. With each of these collapses, customers lost millions, sometimes even billions of dollars. Now more than ever, it’s important to keep your cryptocurrency investments safe and secure, which is why we’ve put together a list of the safest ways to invest in cryptocurrencies.

Purchase Exchange-Traded Funds or Mutual Funds

One fairly safe way to invest in cryptocurrencies is by purchasing an exchange-traded fund or mutual fund that owns or tracks the value of a given cryptocurrency. This allows you to get exposure to the cryptocurrency market without owning the assets themselves. It’s important to pay attention to the financial instruments you use though. The cryptocurrency market is in a fragile state, and there is a possibility that contagion could spread to these ETFs and Mutual Funds. As of the time this article is being written, it’s rumored that Grayscale, a large player in the crypto ETF space and owner of the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (ETHE), may be on the cusp of facing some solvency issues.

Only Buy Cryptocurrencies on Established Exchanges

If you would like to invest in cryptocurrencies and keep them on an exchange, it’s best that you only keep them with the most reputable companies, such as large, established stock brokerages. Players in the stock brokerage space, like Fidelity Investments, TD Ameritrade, Charles Schwab, and Interactive Brokers have gotten into the cryptocurrency space recently. These traditional banks are considerably less likely to find themselves facing the same troubles that many crypto exchanges have been facing recently. This is because they are public companies, listed on reputable stock exchanges, and are bound to some of the strictest regulations in the world.

Store Your Tokens on a Cold Storage Wallet

At the end of the day, the safest way to invest in cryptocurrencies is by purchasing them on an exchange and then quickly moving them off-exchange onto a cold storage wallet. Cold storage wallets are devices very similar to an external hard drive. They are not connected to the internet or any third-party exchanges. This makes them invulnerable to hacks and the increasingly common liquidity crises that are driving exchanges into bankruptcy. When investing in cryptocurrencies, always remember, if your tokens are not on a cold storage wallet, they’re not truly yours and are incredibly vulnerable!

Consult With a Financial Advisor

Before making any investments in the cryptocurrency space, speaking with a trusted financial advisor is pivotal. The crypto space is incredibly volatile and can be difficult to navigate. That’s why it’s important to know the risks you are taking before making an investment. If you’re looking for a trusted advisor to guide you through the risks and uncertainties involved with investing in cryptocurrencies, Urban Wealth Management can help.