Though you scroll through investing news on your phone every morning, checking the stocks as you stir your coffee, you’ve been a little leery of crypto. You’ve heard a lot of hubbub about people being taken advantage of, or outright scammed. Yet, you’re even more leery of leaving money on the table. And at this point, you know that crypto is here to stay. Time to get started — but safely, of course.
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Fortunately, there are ways to start investing in cryptocurrencies that can limit your risk of being scammed. GOBankingRates chatted with some experts to find out more how you can dip your toe into crypto investing without getting taken away by the current of fraud.
Look For Well-Established Projects
As the co-founder of the crypto growth platform Galxe, Charles Wayn knows how to spot solid crypto projects. His biggest tip for anyone looking to invest in a crypto project is to find one with a large, active and well-established community around it.
The same high standards you’d apply to any other company you’d invest in — like the quality of the products and projects, its track record of success, as well as the reputation of its leadership — are also applicable to cryptocurrencies.
“Reputation and credibility are as important in crypto as anywhere else; as is what the project itself does, the utility and value it’s offering, and its track record in terms of business operations and leadership,” he said. “In short, a good crypto project is not unlike a good company or a quality product and will pass all the same levels of consideration and due diligence.”
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Watch Out for Red Flags
What is that old saying about wearing rose-colored glasses? Oh yeah, they keep you from seeing the red flags. According to Brian McGleenon, crypto expert and global head of news at BeInCrypto, people who fear missing out on the biggest, most exciting opportunities — and not doing their due diligence — risk putting on those rose-colored glasses.
So, what red flags might they miss? McGleenon said to be aware of things like anonymous founders, unrealistic yields and poor website quality — which should immediately raise your suspicion.
“If it feels too good to be true, it probably is,” he said.
Nic Adams, co-founder and CEO of 0rcus, a cybersecurity firm, concurred with these red flags, and added a few of his own. He wants beginners to be skeptical of opportunities that promise high returns with little or no risk, which he calls “a foundational fallacy in financial markets.”
He also cautioned investors about unsolicited contact from individuals or groups, websites with grammar mistakes and poor design, a lack of verifiable team members, as well as the absence of a clear whitepaper or credible security audit from a reputable firm.
“The core principle is to assume a zero-trust posture until technical and institutional legitimacy has been established,” he said.
Put a Security Protocol in Place
Just as you wouldn’t want to leave your bank account information vulnerable to prying eyes, you also need to keep your crypto assets secure. Adams insisted that all new investors adopt a rigorous security protocol ASAP — and he’d start with a hardware wallet that can provide cold storage for most of their assets. He’s also got a few other insights about securing your assets.
“Enabling two-factor authentication (2FA) on all exchange accounts is non-negotiable, preferably with an authenticator app rather than SMS,” he said. “Furthermore, investors must learn to critically evaluate unsolicited communications, never clicking on links or sharing private keys and seed phrases, and always assuming DMs from ‘support’ are an attack vector.”
See What Others Are Saying
You don’t have to go it alone as a new crypto investor — far from it, according to Adams. There are plenty of trusted resources to help you make informed decisions, like blockchain explorers such as Etherscan and BscScan. Third-party security audit reports compiled by firms like CertiK and PeckShield can also give you a lot of valuable information.
But you can also use Reddit or Discord to connect with other investors, who share their personal experiences with particular assets or companies (sometimes very bluntly).
“My advice is to approach the crypto market with a highly structured, risk-averse methodology, much like an institutional investor,” Adams said. “Begin with a minimal, non-material investment in a few established cryptocurrencies to gain a practical understanding of market dynamics, while simultaneously prioritizing education over capital deployment. This approach minimizes exposure to financial risk while building the necessary technical literacy and critical thinking skills to identify and avoid scams.”
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This article originally appeared on GOBankingRates.com: 4 Ways To Scam-Proof Yourself When Getting Into Crypto Investing
