close icon

4 Tips to Invest Safely in Bitcoin, Ethereum and Ripple

Scams, hacking and cryptocurrency exchanges going bankrupt have plagued the cryptocurrency community and have spooked investors in 2017. The picture for 2018 probably won’t change too much. Many traders using our services at ewminteractive.com have been interested in trading bitcoin, ethereum, ripple and other altcoins so we decided to find out how they can protect themselves from some of the risks in the digital currency world.

Let’s just start with a little definition of what the word “safe” means in this article. Here we’ll use it to describe something that:

  1. lets you have indirect access to cryptocurrency markets
  2. is hard to hack (but not impossible)
  3. or something that has the smallest possible chance of being a scam

We also don’t use it to say you can’t have a losing investment or position. You most definitely can and should trade and/or invest accordingly.

Now that we’ve cleared that up, here they are:

TIP #1: USE A TRADITIONAL BROKERAGE THAT OFFERS CFD’S ON CRYPTOS

What’s a CFD?  It stands for Contract For Difference and allows you to profit or lose from price movements on financial instruments (like currencies, stocks, indexes, oil, gold, etc.) that you do not directly own.

A less fancy way of putting it is to say that you can bet on where the price will go, just like in gambling where you don’t need to own a team or a boxer to bet on their success or failure.

So this is an indirect way of profiting from predictions on the price of bitcoin and the rest without actually owning them. There is no way that they can be stolen from you or that you can lose your access to them simply because you don’t have any.

Some brokers in Europe are already offering CFD’s on up to 15 cryptocurrencies but there is a negative side to this. Traditional European brokers let you trade on leverage (and might not even offer non-leverage trading), whereas in the U.S. it’s largely banned.

Leverage means you can borrow money from the broker to buy or sell bitcoin, gold, the dollar, for larger sums than your deposit. This allows you to make larger profits if you get things right but it also means that you will incur larger losses than your deposit. Additional little caveats like spreads, stopping trade at their choosing, slower price quotes, fees for keeping your positions open, can also come into play and make this a bad choice despite the lower risk.TIP  #2: INVEST IN BITCOIN ETFs OR FUTURES 

Another indirect way to replicate the performance of a cryptocurrency is by owning a trust that invests in bitcoins. This trust is traded on a public exchange as a listed security making it as safe as can be.

There can be ETFs (Exchange Traded Funds) or other ETPs (Exchange Traded Products) that follow the performance of bitcoin and rise and fall with it (we don’t know of any that are focused on other currencies right now). There’s no risk in terms of hacking, losing your private key or address, or being scammed.

There are several cons to this alternative and the main one is that there could be a difference in the price of the ETF or other product and the underlying asset. In other words bitcoin might continue growing but what your balance could drop because of the way the portfolio is constructed or even because of high fees.

The two futures currently being traded are XBT on the Cboe and BTC on the CME and when you trade them you could also see a significant difference in the bid and ask prices making it hard to obtain a profit, especially in the short-term. But if you do choose this option you can access it through stock brokers like TD Ameritrade, Interactive Brokers, E*Trade, Fidelity, Charles Schwab and TradeStation.

TIP #3: USE SOFTWARE CRYPTOCURRENCY WALLETS 

Why? Because cryptocurrency exchanges can get hacked, go bankrupt or they could get hit by a glitch. Either way you get dragged down with them.

A software crypto wallet allows you to essentially hold your own private and public keys and interacts with blockhains. This allows users to send and receive their digital currency and check their balance. So you’re not storing the bitcoins, ethereums and ripples (we love saying ripples) but you’re rather keeping private the way to access them. A bit different than a physical wallet with money in it, so don’t get confused.

There are three types of software wallets.

  1. The first one is a desktop wallet that is downloaded to a laptop or PC and can be accessed only from that computer. This type offers one of the highest security levels but if your computer is hacked you could also lose your coins.
  2. A mobile wallet is essentially the same but runs on your phone through an app and gives you the same advantages like the phone does compared to a laptop – mobility and ease of use on the go. They are also smaller and more user-friendly from what we’ve seen so far.
  3. Online wallets – they run on the cloud and can be accessed from both laptops and phones. This makes them the easiest to use but at the same time they are still operated by a company that keeps your private keys online. Which increases the likelihood of foul play – either a hack or someone from the company taking advantage of their position.

Here are some good crypto wallets that we’ve come across over the last several months, although we have to say that most are focused on a single currency, so keep that in mind: Jaxx, Electrum, Mycelium.

TIP #4 – USE HARDWARE AND/OR PAPER WALLETS

  1. Hardware wallets store the private key of a user on a device very similar to a USB. They are stored offline and make transactions online, limiting their exposure and increasing security. They can be compatible with different online interfaces and support various currencies. The user just has to plug the device to a computer or phone, enter their pin and make their transaction. Then you just unplug and keep your coins out of harm’s way. Perfect for long term safekeeping.
  2. Paper wallets don’t necessarily mean that you’ve copied or printed your public and private keys on a piece of paper but that is also an option if you prefer it. But in general they refer to software that generates the public and private keys which can then be printed, written down in a file or indeed on paper.

To make a transaction you need to simply transfer funds from your software wallet to the public address that is kept on your paper wallet. And vice versa.

We’ve got some popular ones over here -> Nano Ledger S (hardware), Trezor (hardware), myetherwallet.com (paper), bitaddress.org (paper)

And that’s about it, let us know if you have any questions in the comments and if you’re interested in how Elliott Wave works in predicting how bitcoin and the rest are going to behave over the next days, weeks and months check out our premium analyses.



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

Should You Buy Solana? What the Charts Say

Solana just cracked the top ten biggest cryptocurrencies with a market cap of just under $21 billion. The rumored Ethereum rival is up 235% in the past month alone after a steep ascent from $22.11 to as high as $75 so far today. Does this mean it is time to join the bulls and invest…

Read More »

Ahead of the Bitcoin Curve Since the Tesla Let-Down

The last time we wrote a free article about Bitcoin was on May 13th. The price of the biggest cryptocurrency had just plunged from over $57k to sub-$46k after Tesla CEO Elon Musk tweeted the company will no longer accept it as payment. As we showed in that article, the Tesla disappointment was just a…

Read More »

ETHUSD ‘s Bearish Elliott Wave Cycle Almost Complete

The time between May 12th and May 23rd is a period ETHUSD bulls would want to forget. The second largest cryptocurrency fell from an all-time high of $4380 to as low as $1730. While some might consider crypto to be gold 2.0, crashes like that one reveal that the space is still a wild west…

Read More »

Bitcoin Bears Needed a Catalyst. Tesla Obliged

Tesla CEO Elon Musk announced the company would stop accepting Bitcoin as payment due to environmental concerns. The EV-maker’s Bitcoin stunt lasted for just three months, apparently the time it took for its CEO to realize how inefficient and energy-consuming BTC mining is, something we wrote about in March. The price of Bitcoin, of course,…

Read More »

Harmony Coin Draws Bullish Elliott Wave Setup

Bitcoin, Ethereum, Dogecoin, you name it. There are already thousands of cryptocurrencies in existence, most of which serving no other than speculative purpose. The fact that even the big guys on Wall Street can’t resist the urge to dip their toes in the space only makes retail investors more confident. We remain skeptical. Today, however,…

Read More »

ETHUSD Wave Pattern Can Disappoint the Bulls Soon

For the crypto space, it is 2017 all over again, except bigger. The two biggest cryptocurrencies – Bitcoin and Ethereum – exceeded their previous records and then some. ETHUSD, in particular, is now approaching $2600 and is not very far from doubling its January 2018 peak level. Furthermore, ETHUSD is up 32-fold from its December…

Read More »

Bitcoin Can Never Be a Global Currency. Here’s Why

Bitcoin’s relentless rise in the past year forced even some its most vocal critics to throw in the towel. Kevin O’Leary, for example, used to call Bitcoin “garbage”, but recently said that he has 3% of his portfolio in BTC and ETH. And indeed, many, us included, have been calling Bitcoin a bubble for years,…

Read More »

More analyses