CRYPTOCURRENCY was born in January 2009 with Bitcoin.
A cryptocurrency wallet exists for the purpose of sending or receiving digital currencies.
Before we go any further, a word of warning as savvy investors should be aware that cryptocurrencies are not a guaranteed way to make money.
Cryptocurrencies are very volatile and can make large swings in value without notice, leaving you with less than you have invested.
Crypto firms are also not regulated in the same way as other financial companies, which means you are not protected if things go wrong.
What is a crypto wallet?
Known as a digital currency used to function as a virtual medium of exchange, cryptocurrency does not depend on any central authority – including a government or a bank.
To access its cryptocurrencies, a crypto wallet comes into play.
A crypto wallet keeps its private keys – a term essentially meaning a password – accessible and safe.
In a crypto wallet, one can send and receive cryptocurrencies.
Different forms of crypto wallet are also available.
Ledger, for example, is a hard disk similar to a USB key.
Mobile apps for this also exist, Coinbase Wallet being one.
Cryptocurrency exchanges live on a blockchain, which is just another word for a list of cryptographically secured records.
Each blockchain is only accessible with a private key, which a crypto wallet stores.
Without his keys, access to any cryptocurrency he may have is gone.
Do investors need a cryptocurrency wallet?
Although a crypto wallet is not technically necessary, it is highly recommended for those investing in cryptocurrency.
5 risks of crypto investments
BELOW, we’ve rounded up five risks of investing in cryptocurrencies.
- Consumer protection: Certain investments advertising high returns based on crypto-assets may not be subject to regulation beyond anti-money laundering requirements.
- Price volatility: The significant volatility of crypto-asset prices, combined with the inherent difficulties in reliably valuing crypto-assets, exposes consumers to a high risk of losses.
- Product complexity: The complexity of some crypto-asset-related products and services can make it difficult for consumers to understand the risks. There is no guarantee that crypto-assets can be converted back into cash. The conversion of a cryptoasset into cash depends on the existing demand and supply in the market.
- Charges and fees: Consumers should consider the impact of fees and charges on their investment, which may be higher than those of regulated investment products.
- Promotional material: Companies may overestimate product returns or underestimate the risks involved.
The wallets increase the security measures surrounding its crypto stash.
However, hacking remains a viable risk when it comes to crypto wallets.
In 2020, for example, KuCoin was hacked for over $200 million, although users eventually got their funds back, according to Blockchain Journalist.
“Really, all you need to transact in crypto is two things: your wallet address, which is also called your public key, and then your private key,” said CryptoConsultz founder Nicole. Decico, via Time magazine.
Think of a public key like a routing number or a bank account number.
Public keys can be shared so that cryptocurrency exchanges can take place.
A private key, however, is comparable to a PIN – not something recommended to be shared with others.
When can you trade cryptocurrencies?
The cryptocurrency market is open 24 hours a day, seven days a week.
As the market is global, there will always be activity no matter the time of day.
This means that there is no ideal or recommended time to trade, as price changes can occur at any time.
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