1. Introduction

Cryptocurrency is a rapidly changing market – so information comes out fast and furiously. In this type of environment, it is important to keep your finger on the pulse and to stay updated frequently. As more and more people, businesses, and industries start to take notice of crypto – it becomes even harder to keep up to date with everything. Failure to do so can result in being misinformed which can ultimately lead to making poor decisions. Whether it be missing the details on an important security update or some new government legislation, information is power. Failing to be informed can be the difference between making or saving thousands of dollars – or losing this money. Though there are many mediums and methods for staying updated, from podcasts to blogs to even social media, it is important to bring these methods into an efficient process. An example strategy would be to allocate certain hours of the week to read articles and news or even subscribing to newsletters. The best traditional method for staying updated has and always will be through listening or reading the news. Actively searching for news, big or small, can be too time-consuming, and one can easily miss news if it is less publicized than others. This is why it is important to create some sort of notification system for important news. This is where the cryptotrader comes in.

1.1. Overview of the Crypto World

The crypto world is a very broad term. It’s best to understand each component to see the developments. The first is blockchain, which is simply a ledger of unchangeable, constantly updated data between parties. The blocks in the name refer to the data and the chain is linking them together. A simple concept but it has far-reaching implications in security and transparency. Imagine being able to document the stored location of every food product and being able to verify that location without any doubt. This is the aim of Walmart with Blockchain. To improve transparency and food safety. Another company, Medici, is aiming to use blockchain to aid the world’s poor, with their GrainChain platform which traces commodities contracts and payment systems between small producers, as the platform stands to improve ineffective systems in developing countries. By understanding blockchain applications, we can see the potential for various projects and how they’ll shape the ideas of cryptocurrency. The second part of the crypto world is cryptocurrency, the digital representation of value using cryptography to make it very secure. Usually, this secures its creation and transactions, as the currency can just be stored in a computer file there is a risk of it being copied and then it essentially loses all its value. Cryptocurrencies run on blockchain technology; they are issued to raise capital for a project but can also simply be a means of representing a digital asset or a fiat currency. Initial coin offerings are the usual method of issuing new cryptocurrency, seen as similar to an IPO for stocks. The recent comparative success of an Ethereum project to a traditional IPO has started a debate about whether traditional stock exchanges will run on blockchain in the future.

1.2. Importance of Staying Updated

The crypto world is full of unfortunate examples of the importance of being up-to-date, especially in terms of security breaches. A large event was the DAO, a crowdfunding project and a form of decentralized autonomous organization with the purpose of providing funding for all future Ethereum software development. An exploitable vulnerability in the DAO’s code was found and is estimated to have led to the loss of 3.6 million in investment from the Ethereum community. This led to a split in the Ethereum community: the soft forking of the Ethereum blockchain in order to mitigate the effects of the theft, which is a direct violation of the Ethereum constitution, which states that code is law. This situation and the events that unfolded are very complex but can be simplified as a loss of funds due to an oversight in code, and the repercussions of this loss, such as a split in the community, are events that could affect the value of Ethereum significantly. This event may not have been fully understood by someone not up to date with crypto events, and they may not know why the price of Ethereum has changed so drastically in the past few months. This difference in knowledge can severely affect the trader. Someone who was aware of these events could have predicted a drop in the price of Ether and sold their shares in order to rebuy them at a later date, effectively increasing the amount of Ether they have. Someone who was unaware of these events may have panicked and sold at a lower price and is now unable to acquire the amount of Ether that they previously had. This is the difference between someone who is up to date with events in the crypto world and someone who is not. A successful trader in the world of cryptocurrency is someone who makes decisions based on solid knowledge of market conditions, a condition that is always changing. High-quality decision-making necessitates quality information. Without knowing the chain of events in the Ethereum community in this recent period, one may not have knowledge of market conditions for Ethereum. Information is time-sensitive. What we know today might not be as relevant in the future. This brings us into the next topic of discussion: trends.”

“Since the crypto world is constantly changing, in order to be a participant in the ever-growing world, it is crucial to always be up to date. A perfect example of this can be seen in the general news events that occur in everyday life.

2. Market Trends

In the past few weeks, Bitcoin has experienced its largest price drop since the start of the year. On October 9th, Bitcoin closed at a price of $8,167, its lowest price since June. This price drop came after a few weeks of ranging in the $8,000s, which suggested that Bitcoin had found relative stability in its price. However, in just over a week, Bitcoin’s price dropped to as low as $7,978 on October 6th, with much of the loss occurring within a 48-hour span. Though the drop was sudden and may be seen as bearish to many, crypto traders on Twitter were quick to provide a positive spin, with many seeing Bitcoin as “on sale” and a great buying opportunity. During the time of the price drop, there was also an increase in long positions, suggesting that many traders are still confident in the long-term prospects of Bitcoin. All other activity in the crypto world’s markets can be seen as a ripple effect stemming from Bitcoin’s recent price action. Altcoins saw their valuations drop in terms of satoshis as Bitcoin’s price tumbled. A select few altcoins were spared from the wrath of Bitcoin’s decline, with a good number of them not seeing significant percentage losses, though their USD value dropped all the same. As Bitcoin now sits at $8,374 at the time of writing, it seems to be ranging once again, and many hope that it finds stability here. This would provide relief for both Bitcoin and altcoin traders and possibly reverse the market downturn that we’ve seen in recent times.

2.1. Bitcoin Price Fluctuations

To emulate the effects of supply and demand on price, many have assessed changes in network activity, namely transaction volume and number of transactions. It was found that increased transaction volume had a positive impact on the BTC/USD price in OTC markets of high-net-worth individuals. A potential explanation for this is that increased transactions are likely to be as a result of new demand by individuals wishing to buy bitcoin as an investment or through adoption of Bitcoin as a means of value storage in emerging markets. This resulted in those intending to sell/transact in bitcoin holding their coins for longer periods, thus reducing the potential level of ‘selling pressure’ and leading to a price increase. However, transaction volume had no effect at all on the BTC/USD exchange rate, which is indicative of speculative trading being the dominant factor in price. Stepwise flow analysis has shown that although there was a negligible effect of speculative flows on the exchange rate, the dominant force in price determination was a change in the number of hedgers. This suggests that many bitcoin holders are fundamentally believers in the long-term potential of Bitcoin as a valuable digital currency, and thus a decrease in selling pressure by hedgers will lead to a price increase. A recent study identified the impact of self-fulfilling prophecies, with the price following the logarithmic trend of the number of users, and price manipulation at Mt. Gox as a cause of price increase. As each event was announced, there was a significant increase in the daily price and volatility of Bitcoin. A recent study found that bad press, such as Silk Road, has a temporary negative effect on the price.

Bitcoin’s wild price rides

Bitcoin’s price and subsequent market trends are fickle, with the price of the coin often characterized by a significant level of volatility. In recent years, high liquidity at the exchange level, uncertainty surrounding global macroeconomic policies and financial turbulence, speculation within local bitcoin markets, and the burgeoning bitcoin market in emerging markets have all been identified as sources of Bitcoin’s violent price fluctuation. However, employing traditional stock market methodologies to identify potential determinants and explain future price trends has proved largely ineffective in Bitcoin’s relatively immature market.

2.2. Altcoin Market Analysis

Price overshadowed the crypto and altcoin markets. This week has been a hard and testy week for most inclined investors with vast altcoin portfolios, with the market seeing an array of large price crashes and sideways movement with little signs of relief. As a result, Bitcoin has been slowly increasing in dominance, from 65% to 68% in the last month, causing more pain for altcoin holders. During last week’s report, we outlined some key support levels and forecasts for BTC/USD and BTC dominance. These will be looked at to see how we are tracking in relation to the recent market activity. Changes in dominance are crucial when determining how speculative market sentiment is in regards to real-world use, adoption, and investment. A cheap and more readily available asset class is likely to see retail and institutional investors prioritize speculative trading over investment, which is correlated to Bitcoin and altcoin dominance in different ways. During turbulent times in bitcoin value, funds are likely to flow into Tether and back into USD given decreased confidence, another factor that is negative for altcoins. The market is lacking confidence. Volume continuing to decrease on good and bad moves has been a continued theme for cryptocurrency in 2019. The cryptocurrency markets are averaging around 45 billion, compared to 80 billion in August 2018. This categorically suggests decreased speculative interest and a greater entrenchment of invested capital. A second factor is that less on-chain transaction value is continuing to paint a picture of less real-world use and adoption. This was predominantly centered around altcoin markets, given that Bitcoin on-chain transaction value saw a significant YoY increase. Why is this continuing to happen? Altcoins are a global-facing market. They are heavily correlated to the value of BTC, and with a global slowdown in equity markets and trade wars, this has a flow-on effect on speculative assets. High on-chain transaction value and real-world-use crypto assets are often offshoots of Bitcoin. This is likely to continue until there is a significant shift in BTC dominance, which is predicated on a clearer view of global economies. Steps taken towards our long-term 12,000 and then 13,000 BTC price targets are continuing to look on the demise now. This is without a bullish outlook on altcoin markets, and BTC dominance increases are negative for altcoin USD value. The 10,500 review had little to no follow-through, and 10,000–10,100 is now being seen as a temporary resting place with a high probability of retesting to 9,800 in the in the short term and lower for global macroeconomic factors. Any price action that closes under $9,800 will affect altcoin markets even more. Measures have been taken to cover shorter time frames in relation to such conditions. Now looking at BTC dominance, which was outlined as a leading indicator of more pain for altcoin holders, we can make a strong volume profile case that this will continue even if the BTC price stabilizes. Previous weeks saw BTCD hit 66%, and from a fortnight chart perspective, it now has a battle at 68%, which needs to be defended. The previous rise from 64% to 66% was a $100 billion market cap loss for altcoins and came with a sloping decline instead of a sharp increase, which shows the BTC dominant price action is more bullish. With BTC dominance, several tests are made to set short trades in altcoin-valuing pairs with stop losses varying from breakeven to small losses at leaked strength with the intention of opening BTC swing longs at the near bottom range. We continue to monitor the 2018 descending triangle bottom of 62%.

2.3. Stablecoin Adoption

On a similar note, a pre-sale has been announced for the Japanese Yen stablecoin ‘korius’, which is built on the Stellar network. The stirred-up interest has led to the sale’s funding target equating to around $500,000. The stablecoin’s developers have expressed their hope for it to be utilised in the remittances industry, as they anticipate that the currently overseas foreign workers in Japan send in excess of $5 billion to their home countries each year.

The aggressively incentivized move is being made in a deal with six of South Korea’s leading e-commerce platforms and is a bid to promote the use of Terra’s HRL (KRW-pegged) stablecoin for online purchases.

Micros on Japanese Yen Stablecoin South Korea-based blockchain project Terra has revealed it will seek to become the first stablecoin that is really used by driving its expansion into e-commerce. It has fueled the switch by providing a special promotion where the first 500,000 users of its CHAI payments application will receive 10% of all purchases back in the form of its native Terra (LUNA) token.

3. Regulatory Developments

Given that cryptocurrencies facilitate various types of online gambling, some nations may seek to restrict cryptocurrencies on the basis that they exacerbate gambling addiction. Russia has taken a particularly hard line on this and has made repeated efforts to fully or partially ban access to cryptocurrency exchanges. China’s regulatory approach has been similar, and from September 2017, leading cryptocurrency exchange sites were blocked by Chinese authorities. Even in nations where the use of cryptocurrencies is unrestricted, there is often an unofficial governmental stance on how harshly businesses using cryptocurrencies should be regulated. An example is the Isle of Man, which, though it has not forced any crypto-specific legislation, has expressed a desire to improve consumer protection and prevent money laundering. This stance led to a crackdown on fiat-cryptocurrency exchanges in April 2016 due to concerns that they required no official licensing.

The most common way in which governments regulate cryptocurrencies directly is through taxation. Given the relative anonymity of the users of most cryptocurrencies, states are eager to ensure that cryptocurrency trading and usage do not bypass existing tax systems. How one is taxed is dependent on one’s location, and some locales will seek to apply capital gains tax, VAT or income tax on cryptocurrencies. The buyer’s local laws on cryptocurrency, the timing of the sale, as well as the duration of ownership, will all factor into the tax status of the cryptocurrency in question. Failure to comply with these tax obligations can result in prosecution.

3.1. Government Regulations on Cryptocurrencies

The Internal Revenue Service (IRS) in the U.S. has been seeking more well-defined regulations on how to tax and report taxation on cryptocurrency in the form of a notice being sent to over 10,000 cryptocurrency holders suspected of failing to report income and pay taxes on transactions involving digital currency. This is an attempt to counter a $32 billion loss in tax revenue from cryptocurrency users who may not know how to comply with current tax laws on cryptocurrency or are actively trying to avoid reporting income.

Regulations surrounding cryptocurrencies continue to remain a hot topic among governments and regulatory bodies. In particular, developed countries have been stepping up their game in ensuring that the privacy, decentralization, and pseudo-anonymous nature of cryptocurrencies do not allow for illegitimate activities in the form of funding of illegal operations and tax evasion. The last year has seen increasing interest and activity in this regime.

3.2. Central Bank Digital Currencies (CBDCs)

A recent and relevant example of the first set of motivations is the situation in Sweden. E-krona has been proposed as a complement to cash, which is used less and less by the general public. By issuing a CBDC, it is hoped that access to central bank money will be ensured and the payment system in the country will be more resilient. Simulations of the CBDC and its DLT-based backend are expected to be run for the next few years by Riksbank. This is primarily to understand the implications of E-krona on the Swedish monetary system and to find a suitable and efficient way to implement it.

There are generally two sets of motivations behind the issuance of a CBDC. Firstly, as an easily accessible form of digital payment and to modernize the existing operation of the fiat currency. The second set of aims is to provide an alternative to the decreasing use of physical cash and to provide a public tool to maintain access to central bank money. While these motivations are similar to those of Libra and other stablecoins, which aim to facilitate digital payments using a form of currency more stable than cryptocurrencies, they differ in the sense that stablecoins and the cryptocurrencies they are based on seek to establish a new currency and payment system.

A new type of cryptocurrency, Central Bank Digital Currencies (CBDCs), is increasingly being introduced by various governments worldwide. These are the digital form of a country’s fiat currency and are issued and regulated by the relevant country’s central bank. Unlike traditional cryptocurrencies, CBDCs are centralized under the control of the issuing central bank.

3.3. Anti-Money Laundering (AML) Measures

Despite being burdensome, implementing AML standards into blockchain is still possible. A company can automate customer due diligence through smart contracts, where a contract with certain conditions will be self-executed upon customer onboarding. New technology, such as artificial intelligence, can provide better monitoring compared to old transaction monitoring systems. And with a complete history of a transaction in blockchain, it can prevent over-investigation by authorities.

FATF also requires companies to identify the source of the customer’s funds, fund destination, and customer information to avoid sending a customer to another customer. The most burdensome task is to monitor and conduct ongoing due diligence on the customer to detect any suspicious transactions. While blockchain has complete records for a transaction, it may not have the information of the entity who made the transaction. If certain data from a transaction is lost, it is hard to distinguish which may be considered suspicious. This would be too hard compared to the traditional AML of maintaining lists of thousands of customers for transaction monitoring.

A cross-border payment system based on blockchain can never escape the eyes of regulators. Anti-Money Laundering can happen in any form, especially in cross-border payments. AML has universal standards imposed by the Financial Action Task Force (FATF), which in some cases can be too burdensome for a company. According to SWIFT, for a blockchain company to implement AML standards, it has to conduct Know-Your-Customer (KYC) due diligence, which is to identify the real identity of a customer. This would be tough as not all the information that has been given, whether it’s real or fake, and sometimes a customer does not have enough documents to prove it. A company has to obtain information concerning the purpose and nature of the business relationship to develop a risk profile. After risk profiling is done, a company has to do a customer risk assessment to see whether the customer has a higher risk of money laundering based on their profile.

4. Industry Updates

Some of the larger cryptocurrency exchanges are going to be targets for new listings in 2019. Binance, the largest exchange by trade volume, introduced a new platform to its site called Binance Singapore, which allows a Singapore Dollar (SGD) on-ramp for previously established cryptocurrency pairs. This platform also provides a new venue for Bitcoin and Ethereum trading against the SGD. OKEx, the second largest exchange by trade volume, introduced a new derivative product that will be exposed to 10 different cryptocurrencies but settled in Tether (USDT) with up to 100x leverage. This could be a direct ploy to increase the circulation of Tether on the network and act as a contender to bitcoin-settling products on the platform. The two cryptocurrency giants look to leverage their reputation and volume with the introduction of XRP trading on the platform. With regulation being a huge issue for Ripple, this could be a move to attract traders in proving that XRP has a utility and isn’t classified as a security. In a similar move, some smaller cryptocurrency exchanges are aiming to leverage their platform, offering unique trading capabilities and incentives. Beaxy Exchange, a new exchange backed by One Market Data offering a relatively cheap, technologically advanced trading platform, aims to list SIL, a private and scalable cryptocurrency for the digital age. Offering SIL trading pairs against USD, EUR and BTC, this could be an attractive liquidity option from other more established exchanges. KuCoin, a relatively new upstart exchange, has demonstrated their ambitions to increase user base and volume by listing multiple smaller-cap projects. One of these listings is QLC Chain, a project centered on developing the telecommunications industry through the use of blockchain technology. This could be an important partnership for KuCoin in a bid to attract a demographic in telecommunications and technology-based industries. With new exchange listings come a range of cryptocurrency tokens exposed to different market dynamics and trading behaviours, Keep informed of these changes using the Token Analyst platform.

4.1. New Cryptocurrency Exchanges

4.1.1 AAX Exchange AAX exchange is a new cryptocurrency exchange that has been launched on the back of the London Stock Exchange Group’s LSEG Technology. This exchange claims that it has been built with the latest in security and regulation in mind. Unfortunately, it is still widely understood that cryptocurrency was not its partners’ original intention, with an LSEG news release stating that LSEG technology will “provide a scalable, institutional-grade platform for AAX to offer cryptocurrency trading services, featuring LSEG Technology’s proven, reliable, and secure matching engine and market surveillance offering.” The result seems to be that LSEG has provided an efficient way for AAX to launder money from ICOs into various cryptocurrencies and then to the wallets of token issuers. This means there may well be a large supply of various ERC20 tokens available to trade on this platform. The choice to target ERC20 tokens is further evidenced by an AAX airdrop of 55,000 USDT worth of ERC20 USDT. AAX Exchange has not been launched with a referral program; however, it may be added in the future. This exchange is likely to see high ERC20 trading volume, which could make the price of various ERC20 tokens more volatile. High trade volume and price volatility can lead to a token being listed on CoinMarketCap, into the top 200 market cap, and to price discovery, as well as becoming more attention-worthy to traders. This exchange is a double-edged sword for cryptocurrency. LSEG’s participation can be seen as a legitimizing move for institutional investors seeking to trade cryptocurrency, yet large movements in ERC20 tokens could well be speculative in nature. The success of this exchange and associated token price movement may lead to a regulatory backlash in which attention turns to the legality of various token issuances. The AAX exchange is one to be monitored.

New cryptocurrency exchanges: This section takes an in-depth look at a number of new cryptocurrency exchanges that have launched in the last few months, helping to understand what makes them unique and what they intend to offer to traders. It will also assess the likelihood of the success of these various exchanges. This segment is important for traders as new exchanges can often be a source of various airdrop and referral opportunities, as well as having significantly higher trading volume due to cost incentives. This can lead to new trading opportunities for a wide range of altcoins that may not be available on well-established exchange platforms. This will impact cryptocurrency prices and markets and can set these exchanges apart if they offer a better trading experience than that on other exchanges.

4.2. Partnerships and Collaborations

IOHK has mentioned in the most recent Cardano engineering report that they are looking to work with the Altoros development team to create a Cardano Scala community that would complement IOHK’s efforts and enhance the adoption of Cardano among developers.

The second of these was the partnership between Emurgo and online security provider Blue Korint, which will see the companies develop blockchain traceability solutions. This is a shared effort so that Emurgo can securely and efficiently make solutions utilizing blockchains to cater to enterprises.

June 2018 saw the announcement of 2 major partnerships within the cryptosphere. The first of these was the collaboration of privacy-oriented altcoins, Particl, and the digital asset platform RTrade. This venture seeks to create a trustless marketplace for Particl built on RTrade’s temporary blockchain. This is a long-term venture, and RTrade’s IPFS pinning service will be used by Particl to store all of its data.

Early in March, both Ledger and Ontology announced their partnership, which would see the two companies join forces to work on the development of the decentralized digital identity arena and the integration of Ontology’s system with Ledger’s.

4.3. Blockchain Innovations

In the spirit of blockchain and its groundbreaking uses, it is always uplifting to see new ways to incorporate this technology into business, especially now with cryptocurrencies as the main buzz. A recent study by Deloitte showed that over 85% of the companies surveyed viewed blockchain as a critical priority. A fine example of how we can implement blockchain is by tracking progression. Gummy vitamin company Bixo has just chosen to launch nutrition gummy bears that will utilize blockchain to track the ingredients from manufacturer to customer. Ingredients such as turmeric, which have many health benefits, can be tracked in depth from their cultivation, processing, and extraction all the way to the final product, so the customer can see the true value of the ingredient. This can provide safety for parents who are giving the supplement to their kids and are unsure or worried about what is inside it. Several of the ingredients that Bixo uses to manufacture the gummies have full traceability platforms built with blockchain already available. These can be easily integrated with what Bixo is trying to achieve. This shows the true sophistication of blockchain and how it is invaluable in setting a new standard in Bixo’s industry. From one innovation to another, NULS picked up a second-place prize in the 2019 Devawards for their Chain Factory, a prestigious platform that makes it easy for enterprises to build custom blockchains. Available as a beta, this is a huge milestone, as blockchain is currently a complex technology to develop. By removing the need for coding and providing flexibility, it is feasible for businesses to integrate their businesses with blockchain and on their own blockchain. NULS ultimately seeks to match businesses with blockchain developers. This being a global project, NULS looks to team up to provide this solution for the tourism industry in the Caribbean.

5. Security and Privacy

Cybersecurity Threats in the Crypto World Security threats for cryptocurrency can come in the form of hacking, scams, malware or new innovative methods to steal private keys and information. With the advanced development of cryptanalysis and new quantum computers, it is also possible that in the future, encryption methods for coins may be broken, transactions could be intercepted, and double spending might occur. Stealing coins is, however, the most common type of attack, as it’s very difficult to fully secure coins, with some methods being both complex and confusing for the average user. High-net-worth individuals and organizations, such as exchanges and online stores that accept crypto payments, are at the greatest risk from potential large-scale attacks. An example of one such attack would be the theft of $937,000 worth of NXT from an investor’s wallet, which led to NXT issuing a hard fork to negate the stolen coins.

Privacy and security have always been a major concern for cryptocurrency users. Cryptocurrency is often known for its anonymity while making transactions, which makes it an appealing target for cybercriminals. There have been various methods invented by developers to counter these threats, but a substantial number of tools are yet to be implemented. In this chapter, we shall look into some of the present threats to cybersecurity in the crypto world, as well as consider the future and analyze the potential the various methods have for fully securing privacy as a standard. This is especially true considering that it is an irony that although privacy coins are among the most popular among crypto users, it is with these coins that cybercriminals are showing a preference to extort money from victims as tracking the transactions is near impossible. Finally, we shall look at the various best practices that cryptocurrency users should undertake in an effort to secure their assets.

5.1. Cybersecurity Threats in the Crypto World

One well-known type of attack is called a 51% attack, and it is more likely to occur to cryptocurrencies which are based on a Proof of Work consensus algorithm. A 51% attack occurs when a group of miners possesses more than 50% of the network hashrate, at which point they are able to (privately) create an alternate blockchain in which to double-spend coins. This attack is unlikely to occur to a cryptocurrency like Bitcoin or Ethereum due to the cost involved in acquiring that much mining power and the subsequent loss in offloading the coins on the market due to the damage done to their value. However, a cryptocurrency with a smaller network can be much more easily attacked; many new cryptocurrencies have fallen victim to 51% attacks, and the attackers have never been caught. Finally, it is worth noting that cryptocurrencies make a very tempting target for malware authors, and certain types of malware will seek to change the recipient’s address of a cryptocurrency transaction to an address belonging to the attacker.

Cybersecurity remains a concern as cryptocurrencies become increasingly mainstream. There are security concerns both for individual users and for exchanges. While the history of lost and stolen cryptocurrencies is not short, it has not been a threat to the security of the blockchain itself. It is useful to divide the security concerns into those specific to internal and external threats. The most serious external threats are those attacks that seek to alter the blockchain in ways that are detrimental to the network (double spending, temporary or permanent denial of service, etc.).

5.2. Privacy Enhancements in Blockchain Technology

The XOR operator is also a simple method to increase security in certain applications. The operation replaces plaintext with ciphertext using the following logic: if the two bits are the same, the result is 0. If the two bits are different, the result is 1. The idea is that the pattern used to encrypt the data is more important than the actual data. Unfortunately, this method is easily deciphered and should not be used alone for strong security. A much more secure method is the modern technique of public-key encryption. This involves an algorithm using two different but mathematically linked keys; one key is public and may be shared with others, while the other is private and must be kept secret. The public key is used to encrypt the plaintext, and the private key is used to decrypt the ciphertext. The strength of the encryption depends on the fact that it is infeasible to derive the private key from the public key. In turn, the private key is used to digitally sign a message or piece of data, which can then be verified by using the public key. Both data encryption and secure information transmission are important for privacy enhancement, and the most widely used method for information transmission is SSL/TLS. Unfortunately, the design and inherent security of some cryptocurrencies mean that SSL/TLS is not enabled by default. This means that unencrypted data can be transmitted to servers, which is a major security risk. The developers of some cryptocurrency protocols, which do not already incorporate privacy or security features, are now investigating and implementing these more advanced encryption methods to provide a basic level of privacy. Only the use of these secure communication channels or the implementation of privacy features involve keys whose lifespan in the network will serve to further the initial goals of data protection and privacy enhancements.

5.3. Best Practices for Securing Crypto Assets

Guideline 5: Reflect Key Ideas The entire section of “5.3. Best Practices for Securing Crypto Assets” should be a detailed way of explaining the information the outline is giving. These 5 guidelines are just a “sneak peek.”

Guideline 4: Sentence Usage Using varying sentence structures is an effective way to communicate with the reader and not sound predictable. It will not bore the reader. Reducing predictability will also keep the reader interested because they will not know what to expect next, similar to a mystery novel where each chapter leaves the reader in suspense.

Guideline 3: Information Delivery The text should focus on delivering information, explaining concepts, or detailing processes or systems. This is a good thing because this section is supposed to give you the information, instructions, and detail needed to properly secure digital assets.

Guideline 2: Exclude the Topic The topic “5.3. Best Practices for Securing Crypto Assets” does not need to be mentioned because the entire section of the essay should encompass that overall topic.

Guideline 1: Informed Tone First, one should use an informative tone in their response to this question.

This portion of the essay is about “Best Practices for Securing Crypto Assets.” It’s comprised of 5 important things one should do to maintain the security of their digital assets.

6. Investment Strategies

If you decide that you want to buy some cryptocurrency, the first thing you should consider is whether this purchase is a short-term investment or a long-term investment. There are benefits and drawbacks to both. Long-term investments can be likened to putting money in precious metals, as it is a hedge against depreciating currency. Some long-term investors have been successful in “buying and holding” for many years. This is also the strategy used by Warren Buffet with stocks; he often asserts that the best period for holding a stock is “forever”. If you are considering investing for the long-term, it is usually a good idea to keep your money in more conservative assets, such as Bitcoin or Ethereum. This is because more aggressive investments may have a high rate of return but also a higher rate of loss. Although these types of assets can be traded, it is not a good idea to keep trading an asset if it is always moving lower relative to more stable assets. If you make high returns on a more aggressive investment, it is prudent to convert it to a more stable asset before it depreciates. On the other hand, converting a stable asset to a less stable asset in an attempt to increase returns has some clear drawbacks; nonetheless, the earlier described strategy was seen when Britain and Germany left the gold standard in preparation for war in the 20th century. This leads to increased demand and prices for the departing country’s currency, with the opposite being true for the country adopting a more conservative monetary standard. An investor in the know with an understanding of currency markets could profit from these sorts of situations. In today’s cryptocurrency market, such knowledge would be fundamental for forex trading between different cryptocurrencies.

6.1. Long-Term vs. Short-Term Investments

Short-term investment is far less clearly defined, but for the purpose of this article, we shall say it is an investment made with a specific goal to sell at a higher price in a short period of time, usually to take advantage of an expected bull run on a specific asset.

The first thing we need to address is the time frame. Theoretically speaking, any investment made with the intent of profiting that is held for any length of time is a long-term investment. However, in the cryptocurrency space, a long-term investment is a position that is held for over a year and is usually based on the belief that the value of the asset will increase significantly over a long period of time.

There are many different investment strategies in the cryptocurrency space, and an attempt to familiarize oneself with all of them is both extensive and beyond the scope of this article. We will focus on the main long-term speculation and short-term investment strategies so that our readers are able to familiarize themselves with the advantages, disadvantages, and probable outcomes of each.

6.2. Diversification Techniques

An effective method to lower the risks associated with single-coin investments is diversification. This is done by investing in multiple coins at once, which will prevent the investor from losing everything should the coin crash with no chance of recovery. By splitting investment between coins in differing growth stages and those offering different levels of stability and rental returns, the investor can manage risk and maximize potential returns. However, it is important not to over-diversify. With too many coins, it becomes increasingly hard to keep track of the price, tech, and news of each coin, and so there is an increased probability of making errors in investment judgments. Recommendations on the number of coins to hold to achieve diversification without reducing gain too significantly range from 5 to 15.

6.3. Risk Management Approaches

One of the upper-echelon techniques utilized in risk management is an approach called Value at Risk (VaR). VaR provides an evaluation of the maximum potential losses over a specific time period, which under normal circumstances would not be exceeded. Aggregate risk from the portfolio is measured by computing the VaR for the portfolio using the probabilities of the price changes for the assets. Comparisons of risk between different currencies or assets can be carried out using the VaR ratio. Although VaR is widely used, it does have its critics. One of the largest problems with VaR is that it provides an indication of the potential losses from a market position in normal conditions but does not tell the probability of changing from normal conditions into a market characterized by high losses. VaR will give the false idea that there is no risk of losses higher than the calculated VaR when looking at the findings because, in reality, the market can move into abnormal conditions.

The volatile and erratic nature of cryptocurrency markets has necessitated the development of a plethora of advanced risk management techniques. The reason for the development of these advanced strategies for traders is due to the unpredictable nature of the market, which makes it continuously prone to rapid price movements. Identification of appropriate risk management strategies allows traders to avoid the potential for significant losses in the cryptocurrency markets. One commonality between traditional investment and cryptocurrency markets is the understanding of risk-adjusted returns to determine which investments or portfolios are better. The expected returns from the investment are gauged against the potential of the losses, which can provide the basis for the calculation of the future wealth of investors.