How to Trade and Store Cryptocurrency

Many traders are getting to grips with cryptocurrency as one way to diversify their portfolios and mitigate the effect of volatility on a specific asset class or a single asset. Crypto holders also diversify within their cryptocurrency portfolio, so they don't just own one type of coin. 

Once you’ve decided you want to buy crypto, you’ll also need to think about your strategy and how much you’re willing to trade in digital currency. Some hedge fund managers are increasing cryptocurrency holdings to between 5 and 10% of their total assets. Buying a small amount is an easy way to mitigate risk and give you access to the potential for incredible growth attributed to this asset class. 

Next, and before you can buy crypto, you’ll need somewhere to store it. 

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Storing Crypto 

A digital wallet is a data purse or pocketbook. Unlike a physical wallet that stores dollar bills, a digital wallet stores cryptocurrency. A wallet keeps digital assets secure because you need a private key to use it. 

You can withdraw funds and transfer them to other accounts or other wallets like a physical wallet. You need a wallet for each type of crypto or digital asset you own. And there are several types of wallets for desktop, web, mobile, as well as hardware wallets. 

Regular crypto traders or spenders use wallets to send and receive digital currency tokens. There are two types: hot and cold. A hot wallet is connected to the internet, making it quicker to transact to and from, but it can also make it more vulnerable. A cold wallet stores bitcoin offline, safeguarding against cyber-attack. 

There is one thing to keep in mind as you navigate the digital asset economy — although you must have your assets online to trade and do transactions, many experts recommend immediately taking assets offline to a hardware (cold) wallet as soon as you’re done. That means your digital wallet will be disconnected from any remote cloud or other networks. 

A bitcoin wallet comprises the bitcoin owner’s public and private keys. The private key is used to access the bitcoin currency and contains a unique combination of alphanumeric characters. The public key is the equivalent of the account name in a traditional bank account. The trading parties share their public keys. Once the blockchain verifies the transaction, the buyer pays the bitcoin tokens to the seller’s address, and the seller can access the funds via a private key.  

Another last but essential tip is to always keep the hardware secure to avoid losing the digital asset because once it’s lost, there is no getting it back. It’s imperative to secure your digital assets, even though they’re not in physical form. 

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RISK WARNING

The risk of loss in cryptocurrency-related investments can be substantial. It is important that you fully understand the risks involved, that you have adequate financial resources to bear such risks, and that you monitor your positions carefully. We do not provide you with any investment advice. If you are in any doubt about the risks involved with your account, you should seek professional advice.