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The digital ledger technology (DLT) market is an exciting place, but it’s important to be mindful. Here are some tips for investing:
- Recognize stablecoins for what they really are: A loan to a bank-like institution that’s acting as a custodian for your assets and that may not be safe.
- Don’t buy stablecoins. If you want stability, why hold an asset that may or may not be backed by fiat money? You may as well just buy the fiat money directly. Instead of Tether, just hold US dollars.
- Don’t stash your cash or crypto on exchanges. Exchanges also involve significant counterparty risk. Like a bank, you have to trust that they’re safe. Like a bank, they can sometimes play games with your money, lending it out to third parties or even using it for high-stakes speculation. But unlike a regulated bank, there’s no transparency.
- Move the bulk of your digital assets to a hardware wallet that you own and control.
- Be sure to copy the private keys of your wallet to a safe physical medium. It could be a simple as writing it down on a piece of paper. Or better yet, a metal sheet designed especially for this purpose.
Lastly, remain vigilant: There are massive opportunities in cryptocurrencies, but only if you know how to avoid the risks.
Martin Weiss of WeissCryptoRatings.com