As per cryptocurrency statistics given by Buy Bitcoin Worldwide, 900 new coins enter the market every day as of 2021. This fact shows the increasing popularity of cryptocurrency. Let us first understand the meaning of cryptocurrency before looking at the best practices.
What is cryptocurrency?
Cryptocurrency refers to digital currency to make payments. There are no physical tokens in cryptocurrency. All the tokens are generated digitally on cryptocurrency platforms.
Best cryptocurrency practices
Practice 1– Use Artificial intelligence tools in cryptocurrency
You can use cryptocurrency trading bots for trading, borrowing and other cryptocurrency activities. Hodlbot and Cryptohopper are examples of two bots. You can also use various AI tools to predict price changes. Endor, CryptoHawk.ai, Signal use artificial intelligence to provide various analytics. It is essential to monitor the chatbots and set them as per the requirements.
Practice 2– Never put all coins in the same cryptocurrency wallet
If you put all coins in the same wallet, any cyber attack on your wallet can make all your information available. Hence, it is better to put the coins in different wallets.
Practice 3– Use the hardware wallet for transactions
A hardware wallet is a specific hardware device that can store private keys. In the hardware wallet, the key is always in your device. It is easy to link the hardware wallet to another device via USB or Bluetooth. If you want to do any transaction, you can use the hardware wallet to sign the transaction with your private key. The hardware wallet quickly communicates the signed transaction.
Practice 4– Install a firewall for security in your system.
Practice 5– Do all your cryptocurrency operations from a single device. This practice reduces complications.
Practice 6– Do a background screening of all employees before giving them a higher level of access. Determine the level of access for employees.
Practice 7– Ensure strong authentication for your device
One good practice is to use 2 Factor authentication for all transactions. You can also use the Google or Microsoft Authenticator app for authentication.
Practice 8– Be careful of unknown links and emails from unknown sources sent to your email.
Practice 9– Create a separate email address for your transactions and use a strong password. While choosing a password, it is better not to include any personal details like name, birth date, city etc.
Practice 10– Don’t use a public server for transactions. Use VPNs (Virtual Private Networks) for transactions.
Practice 11– Research on your own
It is necessary to research various aspects such as trading volume, history and potential before trading. This research helps to understand the cryptocurrency market.
Practice 12- Don’t store your keys on exchanges, as this can make it possible for many people to view your keys.
Practice 13– Have a backup option.
One way to backup is by following the backup suggestions of your wallet provider. Another way to backup your data is by exporting your keys to a specific file. Exporting the keys enables you to store them wherever you want. You can also select a mnemonic phrase seed or a single mnemonic phrase to back up your data. A mnemonic seed includes a list of specific words that stores essential information to recover valuable data. To backup your data, you have to type the mnemonic seed or phrase. Then. you can download all essential data. Many wallet providers give this option to users.
Practice 14– Choose the cryptocurrency trading platform carefully
Carefully analyze the strengths, weaknesses, security features, purchase methods, tokens that exchanges support, transaction fees and the system interface before choosing the trading platform. Also, understand the three exchange types: brokers, P2P changes and traders.
Practice 15– Hire a vendor for cryptocurrency
Vendors offer customer authentication services and ensure that the organization is complying with the required norms in its territory. One important factor while choosing a vendor is to inquire about what indemnity they will provide in case of losses.
Practice 16– One good practice is not to invest all your capital at the same time.
Practice 17– Analyze the cryptocurrency laws for your area and if for are complying with them.
Every area has its policies about cryptocurrency regarding registration, practices allowed, practices not allowed etc. It is necessary to find out which laws apply to your organization and the steps required to comply with those laws.
Practice 18– Be aware of the basics and cryptocurrency latest trends
You can find cryptocurrency groups on Telegram and Discord channels. Such groups can provide valuable information. You can also read various cryptocurrency blogs such as CoinDesk, Cointelegraph, Cryptobriefing etc.
Practice 19– Invest small amounts at the beginning
In the beginning, the better practice is to invest small amounts till you get a proper idea of the cryptocurrency market.
Practice 20 – Invest in cryptocurrency only if there is adequate information available about the project.
Practice 21– Invest in different types of cryptocurrencies
If you invest in only one type of cryptocurrency and the value of that cryptocurrency falls, you can incur a significant loss. Hence, it is better to invest in many cryptocurrencies so that if there is a loss in one cryptocurrency investment, the profits in other investments can cover up for it.
Practice 22– Make a cryptocurrency trade strategy
Understand the basics of day trade, swing trade and various other trading styles to create a strategy. To know more about creating a strategy, click here.
Practice 23– Link the cryptocurrency with traditional businesses
This practice helps to create clarity about which party has to pay to whom. Also, all the middlemen who earlier facilitated the transactions between sender and receiver of the payment are no longer required.
Practice 24– Be careful while investing in an Initial Coin Offering (ICO)
Many times, offers for early investment are given to the public. The investors receive tokens at a reduced price with a guarantee that the sale will be at a higher price. These offers can provide profits at times, but sometimes, they can also be scams. Hence, it is necessary to conduct a thorough screening of the project, its potential and its feasibility before deciding.
Practice 25– Analyze the trading volume of Altcoins
This practice helps to measure if a long time investment is possible for the coin. High trading volume is one indicator that the coin is suitable for long term investment.
Practice 26– Decide profit targets before investing
Decide the minimum amount of profit you want for each cryptocurrency transaction you do. This practice will help you get a clear idea of whether to sell or wait for a better price to sell. Analyze the value of the coin to decide the profit target.
Practice 27– Understand how to do the technical analysis
Even if the technical analysis in cryptocurrency goes wrong, it can help understand how the market functions. You can use various technical analysis tools like on-balance volume, accumulation/distribution line, average directional index, moving average convergence divergence etc.
Practice 28– Buy at a lower price and sell at a higher price.
Practice 29– Never buy any coin at the peak
Many times, the value of a coin reaches its peak just before crashing. Hence, it’s a better practice not to buy the coin when it is at its peak. One should consider other factors such as trading volume, coin history before buying the coin.
Practice 30– Install a password manager software
It can get difficult to remember passwords. Hence, a good practice is to install password management software to handle all passwords you set efficiently. Trezor, Roboform, Lastpass, Keepass are some excellent password manager softwares.
Practice 31– Ensure that at least two people have access and control over important cryptocurrency aspects
This practice makes sure that if one person is unavailable for any reason, the other person can carry out the transactions, access the vaults and remake the private key if required.
Practice 32– Keep a clear record of important details.
It is vital to keep records of who did the transaction, who accessed the vaults, the day and time for the trade, the signing authority, risk management guidelines etc. This record has to be reviewed by a senior executive in the organization.
Practice 33– Decide the stop-loss orders for the project
A stop loss is a decision communicated with the broker to buy or sell an asset after reaching a specific price. There is a creation of stop-loss orders to reduce investors loss.
The cryptocurrency market is highly volatile. Hence, it is essential to consider all factors and choose the best practices before investing.