Digital assets are now a widely accepted class of investments, and despite short term price volatility they have shown solid growth over a longer investment period (12 months plus) and could be worth considering for a well-balanced investment portfolio.

Decentralisation is one of the strengths of digital assets, such as cryptocurrency and NFTs, but it also happens to present a significant risk to investors as the market lacks the robust protection mechanisms investors enjoy with traditional investments.

That doesn’t mean you can’t safely invest in digital assets. Investors need to be disciplined to protect themselves from fraudsters or, in some cases, from the incompetent, as the digital asset market is still relatively new with low barriers to entry. Either way, it can mean loss of investment, which should be avoided or at the very least mitigated.

So how can you increase the safety of your investment in digital assets, and take advantage of what has so far been very attractive returns?

Systems and processes

It is important to learn the mechanics of investing in digital assets. The good news is it is not that difficult. The bad news is that missteps cost money. In most cases, these losses are small and due to minor errors. Once you understand the systems and processes by purchasing and securing some initial investments, you will quickly become comfortable and begin to understand the market specific terminology and jargon.

Protect your assets

It is entirely investors responsibility to protect digital assets and keep them safe. Below are some tips to protect your assets:

1. Never leave your digital assets on central exchanges (Coinspot, Binance etc). Always move your assets to your own ‘wallets’, preferably a hardware wallet, also known as a cold storage wallet versus the hot wallets on your computer or phones.
2. Never click web links. I cannot stress this enough. Once you begin investing in digital assets you will receive phishing emails (if you do not already, of course) and all sorts of attempts to get you to click links. This is where the self-discipline needs to be present. Never click those links. Not even if the email or text message or whatever comes from your nearest and dearest. (You don’t know they haven’t been hacked). If you want to go to a site that someone has sent you a link for, open a google browser and search for it there. Use the most basic search terms or the name of the business etc and find it that way.
3. Never share your screen. This is critical, as screen sharing can reveal far more than you ever intended.
4. Never share your wallet seed phrase. There are only two people that ever need to know your wallet seed phrases; you and the executor of your estate once you pass on.
5. Invest in a reliable, robust password protection software. You can often store wallet seed phrases in secure notes sections of these and they are a good way to keep them safe so long as the password for this software is very strong. You can also write down your seed phrases for your wallets (yes, you will need more than one wallet most likely) and leave them with a trusted solicitor or accountant.
6. Keep your social media software and wallets on separate devices. I use my phone for social media software and my computer for my digital asset wallets. Keeping them on separate devices provides you some additional protection from potentially clicking (accidentally) a bad link via social media. We are all human after all.

Research

Like you would with traditional investments, take the time to research the digital assets you are considering investing in. Here are a few tips that I have found helpful over the past few years of my investing in these assets. Full disclosure, I learnt these lessons the hard way but I consider the lost investments money well spent (now) because of the valuable lessons learned.

Only invest in assets/projects with ‘doxed’ founders and leadership: This means you must be able to satisfy yourself that you can find these people and review their previous experience, history and understand what safeguards they are building into their businesses to help protect your investment.

1. Who are they?
2. Are they operating a registered corporate entity?
3. What have they done previously?
4. Where are they located?
5. Can you cross verify their identity? (LinkedIn, ASIC, Office of Fair Trading, etc).

Avoid bots and fake accounts: Check the social media accounts of projects you are considering investing in and look for inflated population sizes against genuine engagement chatter. For Twitter, Facebook, Telegram etc, look for single phrase statements of non-specific support. If you see a lot of this, it is a sign of fake accounts and bots.

For NFT projects, Discord is used as the primary social media engagement platform, but the same principles apply. Look for inflated follower counts versus genuine engagement by members. A good rule of thumb is to watch the chatter on these platforms over a few days to a week. If you notice genuine conversation like you would have with your family and close friends, then you can be more confident that the members are real people and real investors and that will give you a sense of how the project is run. You don’t need hundreds of messages per hour, as that may be unrealistic to sustain, but you do want to see periodic and subject specific engagement.

Founder/leader engagement: The best projects I have encountered have always been the ones where the founder and the leadership team are readily accessible and regularly engage with their community. Distant/absent founders and leadership are a red flag for me and should be a warning sign that causes you to dig deeper.

Lastly, the two most dangerous emotions in any investing activity are greed and fear. This, in my opinion, is heightened in the digital asset space. There are examples of 100x returns and more in digital assets, but these are rare and always come with commensurate risk of losing your investment as quickly as you might have made that 100x. Greed helps the fraudsters succeed. You can make profits investing safely in digital assets if you temper greed and stick to your investment strategy with rigid discipline.

Fear or FOMO (Fear of missing out) is the other go to tool for fraudsters. It is currently used at extreme levels – both as a marketing tool and a weapon the take money – in the NFT space. Patience, research, and peer discussions/reviews can help protect you from this emotion being used against you.

*Rob Keanalley is the Founder and CEO of Aquatic Metaverse, an Australian company building a digital asset brand based on entertainment and education with a core purpose of marine conservation.

A published author, with 25+ years of executive leadership across a diverse range of industries positions Rob well to lead a team delivering innovation and market firsts with an NFT project that merges literary and visual arts while gamifying the educational experience for a diverse audience.

Rob also delivers hands-on workshops for new investors keen to capitalise on the long-term growth in digital assets.For more information, visit www.saltysharks.io or join Rob and his community at https://discord.gg/saltysharks.