Avalanche (AVAX) has been classified as an Ethereum Killer by several experts. In this article, Trading Education shares extensive insights into some of the most important factors to take into account that will guide you in your quest to know if Avalanche is a safe investment or is AVAX safe to invest in.
Avalanche has in the space of 17 months become one of the best performing smart contracts-backed blockchain technologies globally.
This has brought extensive mileage to its native asset, AVAX, which has become one of the most traded cryptocurrencies in the crypto trading space today.
Although many experienced traders and investors continue to fork out huge sums of money into digital assets, millions of unsophisticated traders and investors continue to ask questions about the safeness and legality of the use of cryptocurrencies.
This is the primary reason why the keyword “is AVAX safe to invest in” yielded 7.37 million results in 0.57 seconds. It is not surprising that another keyword “is Avalanche a safe investment “ also yielded 7.91 million results in 0.62 seconds.
Inasmuch as you continue to learn more about blockchain technology, decentralized finance (DeFi), decentralized applications (DAPP), stablecoins, and non-fungible tokens (NFTs) and how secure they are, you should know that scammers and hackers are doing all they can to break into several protocols.
In a recent study by Crypto Head which sourced data from the Federal Trade Commission (FTC), cybercrimes involving digital assets have soared significantly since 2016.
In a recent report by cybersecurity firm Sophos, Ransomware, fueled by cryptocurrency, has been involved in 79% of the global cybersecurity incidents in the last 18 months. Towards the end of 2020, Cybersecurity Ventures predicted that more than 70% of all cryptocurrency transactions in 2021 will be for illegal activity.
The crimes vary in nature and include Ransomware, crypto-jacking, DDoS extortion, and popular cryptocurrency exchange hacks. Exchange Hacks involve criminals breaking into digital wallets and taking off with AVAX and other coins held on a particular exchange. This is possible because accounts you hold on centralized exchanges are custodial accounts while accounts held on wallets are non-custodial accounts.
Avalanche (AVAX) Custodial And Non-Custodial Accounts
Holding custodial accounts means that you have access to your accounts through the passwords you set.
Unfortunately, the private keys (passcodes) to your AVAX and overall crypto holdings are in the hands of representatives of cryptocurrency exchanges.
On the other hand, holding non-custodial accounts means that aside from the password for accessing the account, you are given passcodes (private keys) that grants you exclusive access to your AVAX holdings.
In 2018, hackers took off with more than $1 billion in cryptocurrencies stolen from exchanges and other platforms globally.
In August 2021, hackers stole approximately $600 million from exchanges.
Avalanche (AVAX) Gains: Fear Of Missing Out (FOMO)
The other cryptocurrency crime you should take into account is the fear of missing out on potential gains in a particular coin such as AVAX.
As a trader or investor, you should note that AVAX opened on 1st January 2021 at $3.15 and reached an all-time high price of $146.22 on Sunday, 21st November 2021.
This means that in a 10 month period, AVAX increased by 46 times. Seeing the potential of AVAX and crypto coins with relatively lower trading prices, traders and investors are being scammed by so-called experts who promise them huge gains within short periods. As reported by the British Broadcasting Corporation News in May 2021, millions of people are being scammed out of their hard-earned money.
In Europol’s 2020 Internet Organized Crime Threat Assessment Report, Avalanche (AVAX) was not included in popular coins used in dark web activities.
This does not mean the cryptocurrency is safe from being exploited by shadow organizations.
This is the primary reason why Trading Education wants you to get to know what to look out for before investing in Avalanche.
What To Consider Before Buying Avalanche (AVAX)?
Avalanche, like all cryptocurrencies, is a very unpredictable investment instrument.
Therefore, if you are a new trader or investor looking for a safe investment that will bring you decent annual percentage yields, then do not invest in AVAX, or cryptocurrencies for that matter.
AVAX is not the only volatile digital asset; new coins among the more than 17,200 coins in the market today may even be riskier.
Now that we are on the same page, you should always consider volatility when deciding on investing in a particular cryptocurrency. This is because several financial analysts and experts categorize cryptocurrencies as a highly volatile asset class.
What this means is that your capital is always at risk anytime you decide to invest in digital assets.
To give you an example of the volatile nature of AVAX, let us consider a summary of its price history.
AVAX began its trading journey on 13th July 2020 at $4.61 and closed the day at $4.90 with $28,340 as trading volume for the day.
The token maintained its price range and finished the third quarter of 2020 on 30th September with a price of $4.32. The trading volume for the day was $16,932,876. Over two months, AVAX shed 6.29067% of its opening trading price.
It is known across crypto circles that Bitcoin (BTC) retested $20,000 in December and ended 2020 with a new all-time high.
As a result of the bullish nature of the crypto market, altcoins such as Ether (ETH), Binance Coin (BNB), and others followed. Unfortunately, the same could not be said for Avalanche (AVAX). The coin closed 2020 on 31st December at $3.14. Over five months, AVAX shed 31.8872% of its opening trading price.
After opening at $3.15 on 1st January 2021, AVAX closed March for $28.73 with an impressive trading volume of $221,774,579 ($221 million). Such a valuation was possible due to the crypto boom of the first 5 months of 2021.
Since bears always follow bulls, AVAX plunged to a new high low of $11.96 on the last day of June. The fear of Avalanche trading in extinction zones towards the end of the year forced some investors to let go of their assets, only for AVAX to soar significantly to $66.67 on 30th September 2021.
The crypto trading asset continues to increase in value and has gone on to reach impressive milestones crossing $100, $120, $130, and $140 in November 2021.
This means some investors that let go of their investments early lost huge potential gains, signalling that holding onto digital assets for the long term is the norm in the crypto finance space.
Despite the passive income cryptocurrency continues to provide its holders, do not rely solely on them as a way to make money. Have a long-term plan.
More importantly, spread your assets among volatile and less-volatile assets so that you can diversify your portfolio.
Trading Education Advice: Due to the unpredictable nature of digital assets, if you want to maximize profits and minimize costs, invest in AVAX and other cryptos an amount you can write off as bad debt.
Check Out: What Might Happen If You Invest $100 In Avalanche (AVAX)?
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
What Are The Risks Associated With Avalanche (AVAX)?
Fraud and Hacking are the biggest risks that have become synonymous with investing in Avalanche and cryptocurrency investing in general.
According to the Federal Trade Commission’s (FTCs) Consumer Sentinel, from October 2020 through 31st March 2021, reports of crypto-related scams skyrocketed to nearly 7,000.
Cumulatively, the amount of money lost from these reports is more than $80 million.
In an article by CNBC News which sourced data from a report by Elliptic, “The overall losses caused by DeFi exploits have totaled $12 billion so far in 2021. Fraud and theft accounted for $10.5 billion of that sum ─ a sevenfold increase from last year.”
What’s more, it has come to the attention of the Federal Trade Commission (FTC) that several duplicate accounts of Elon Musk have been created to pump prices of certain cryptocurrencies.
This is due to the Tesla Mogul’s power on the cryptocurrency market. Impersonators of the self-proclaimed DOGEFATHER have made off with more than $2 million.
Several of the experts here at Trading Education have been close to becoming victims of crypto-related scams.
What normally happens is that so-called trading and investment experts sense the fear of missing out (FOMO) on the part of millions of people.
As a result, using social media platforms Facebook, Twitter, and Telegram, scammers send their wallet addresses to unsuspecting novice traders and investors who do not know much about the decentralized nature of the current digital revolution.
Once the transaction is completed, potential investors wait with the hope of cashing in on the next golden goose in the market.
Little do they know that the scammers have taken off with their hard-earned money.
With no regulatory body to hold representatives of such wallets accountable, victims do not have any option but to accept their faith as part of the vulnerable population that was scammed through crypto investing.
Trading Education Advice; Any time someone approaches you with an unsolicited offer to help you make above-average gains through the trading of digital assets, you should be alert for a potential scam. Although Shiba Inu (SHIB) has brought gains of 61,451,955% and the Sandbox (SAND) has returned 10,923% year-to-date (YTD) which has made many people millionaires, these continue to remain as exceptional cases.
It does not matter the kind of information an expert offers you.
You should know that the price forecasts and predictions offered through fundamental and technical analysis are not based on certainties but possibilities.
Always conduct independent research on all crypto projects including Avalanche.
Aside from this, research the pros and cons of investing in AVAX through a particular cryptocurrency exchange that meets your needs and interests.
The unpredictability of the cryptocurrency market means your capital is always at risk.
Remember that there are sharks (scammers) online so you as an individual trader or investor should not bleed (send money to strangers).
Other Types Of Scams To Look Out For
Initial Coin Offerings (ICOs) for Fake Cryptocurrencies
Initial Coin Offerings, normally abbreviated as ICOs, is the cryptocurrency version of Initial Public Offerings normally abbreviated as IPOs for the stock market.
Also termed as Initial Currency Offerings, ICOs are a fundraising method that is used by startups to offer products and services that are directly related to the decentralized finance market.
Although popular and mainstream, this is an unregulated way that has been adopted by thousands of individuals and groups to raise funds for their crypto projects.
According to the Review of Finance Studies, more than $13 billion was raised from January 2016 to August 2019.
According to a report by Statista that assessed the number of cryptocurrency ICO projects by industry, as of March 2020, there were 2,329 ICOs launched in the cryptocurrency market.
As per data retrieved from CoinMarketCap, currently, there were 838 ended ICOs, 5 ongoing ICOs, and 5 upcoming ICOs.
Some of the most successful ICOs of all time are NEO, Ethereum, Alias, Stratis, Ark, and NXT.
In an article written by Nathan Reiff at Investopedia titled How to Identify Cryptocurrency and ICO Scams, he pointed out that you should always try to get to know the team.
Aside from that, he urged all potential traders and investors to pore over the whitepaper, look at the token sale, how feasible is the project, and as well exercise caution.
Despite such invaluable information that continues to keep investors on their toes, you should know that cybercriminals have taken advantage of the unregulated nature of the crypto finance space.
As a result, you can adhere to Nathan Reiff’s 5 ways of steering clear of scams but several shadow financial technology (FINTECH) companies continue to crop up daily.
Most scammers have created fake corporate teams and have live social media accounts that continue to update fans of the community about the potency of the whole project.
To woo potential investors, most of these fake corporations create a digital wallet. This increases the credibility and authenticity of the project.
What you may not know is that the wallet has the primary purpose of accumulating money from unsuspecting victims.
As per the experiences of experts here at Trading Education, do not leave the research of a project in the hands of blockchain enthusiasts or decentralized finance experts.
Although one of the factors to watch out for in Nathan Reiff’s article is to pore over the whitepaper, Trading Education will like you to know that most scammers have started plagiarizing whitepapers of successful ICOs.
Therefore, you have not gotten the job done with just the reading of whitepapers.
One of the areas you should always monitor is the price history of Avalanche (AVAX). More importantly, monitor the trading volume of AVAX and other coins.
This is because trading volume plays a great role in making forecasts since it can help analysts determine if AVAX is an attractive or unattractive investment.
At the time of writing this article, AVAX had a trading volume of $767 million. This means that despite the more than 17,200 coins on the market, AVAX continues to see huge investor interest. Always take note of volume.
Crypto Pump and Dump Schemes
Crypto Pump-And-Dump Schemes normally take advantage of novice traders while making huge money for scammers.
Pump-and-Dump has been around for a long time and has been a sure way of making consistent passive income for criminals.
Most often, people connected to a particular crypto project provide false or misleading information in addition to making exaggerated statements.
As pointed out by analyst Oscar Gonzalez of Cnet.com, “They can involve social media influencers who receive financial incentives for telling people to buy a certain digital coin in order to raise its value.” In most cases, once the value of the token reaches the price ceiling of scammers and influencers, they let go of their holdings and pocket the profits.
Once this happens, long-term holders see the token trade at irrecoverable zones and they make huge losses.
Do not buy AVAX or any cryptocurrency because of a recommendation by an expert on social media or a crypto news and forecasting portal.
Only invest in AVAX when you understand the pros and cons of the entire project.
With this, you invest in Avalanche wholeheartedly knowing that you understand the fundamentals should the asset experience a slight dip in price or soar to new price milestones.
Do not fall for pump-and-dump schemes.
How To Keep Your Avalanche (AVAX) Coins Safe
Before investing in Avalanche, you should research about a safe place to store your AVAX tokens.
This is because of the numerous cases of cryptocurrency exchanges being mired in hacking controversies.
In August, blockchain site Poly Network and cryptocurrency exchange Liquid lost $600 million and $90 million worth of cryptocurrencies respectively to hackers.
This is why we continue to urge you to research extensively about the best ways to buy AVAX tokens by taking into consideration, regulation, speed, limit, geographical restriction, insurance, security, and customer service.
Cryptocurrency exchanges that support Avalanche (AVAX) such as Mandala Exchange, Binance, OKEx, FTX, Coinbase, Crypto.com, and Huobi Global among others adhere to regulations.
They prioritize Knowing Your Customer (KYC) which helps curb money laundering and terrorism financing. Invest in AVAX through one of the aforementioned exchanges and you will be able to enjoy trading daily.
Read Also: Best Methods On How To Earn Avalanche (AVAX) Coins Fast
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
Avalanche Security Versus Privacy
As a potential trader, you should know the difference between security and privacy. These can be understood by understanding the roles of the Avalanche Protocol and its native asset, AVAX.
Avalanche (AVAX) Privacy
The Avalanche Protocol is the digital payment network that facilitates financial transactions involving AVAX as a governance token that oversees transactions on the blockchain.
Due to the decentralized nature of blockchain technology, you can maintain privacy in your financial transactions.
This is because you do not have to succumb to the pressure of third-party organizations when sending or receiving funds from your friends or clients.
Avalanche (AVAX) Security
The Security of the Avalanche Protocol lies in the hands of the development team behind the entire project.
Aside from this, the security of your AVAX holdings stored on cryptocurrency exchanges lies in the hands of representatives of the particular exchange.
Staying on AVAX, the security of your tokens on digital wallets that support the token such as the Avalanche wallet, MetaMask, and Coinomi is in the hands of you as a trader.
This is because you are given private keys (passcodes) to help you store your AVAX tokens safely and securely.
The Bottomline ─ So, Is Avalanche (AVAX) Safe To Invest In?
As per the performance of the Avalanche Protocol over the last nineteen (19) months without incident, we can say that it is safe to invest in AVAX. Despite the coins in the market, the trading volume AVAX continues to record daily means that investors have not forsaken the coin for other novel tokens of new projects.
For what’s worth, store your AVAX tokens privately on the Avalanche or MetaMask wallet. You can also store your AVAX coins publicly on well-regulated cryptocurrency exchanges that have the necessary security encryptions to protect your coins.
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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
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