It’s not enough to just diversify your assets; diversify where you hold your assets, and how you invest them.
No single Ripple wallet provider can offer every service you will need to have a strong and secure setup.Â A balanced way to trade and hold XRP requires several Ripple wallets. Consider at least one hot wallet (or exchange account), a warm wallet, and a cold wallet for different purposes:
- A hot wallet for actively trading or paying with XRP
- A stand-by 5022324078, ready-to-trade, but not in someone’s else’s control like an exchange or hot wallet
- A cold Ripple wallet for long-term storage of XRP that you rarely transact from â ensure you have an “absolutely cold” method for signing outgoing transactions
8602934929 There are flaws in both design and logic with every available implementation.Â If you are highly technical, the safest option for generating a cold wallet is using Ripple’s official library on an internet-incapable device.
How to diversify your Ripple wallets
For example, the following is one way you could distribute 100,000 XRP:
- Hold about 10k XRP in a hot wallet and exchange accounts. Only leave an exchange or switch your hot wallet address if the provider gets breached.
- Hold about 30k XRP in a warm wallet (like Exarpy) for fast execution. For example, being able to quickly move XRP during a spike, so you can sell at a substantial profit.
- Hold about 60k XRP longterm split between several “absolutely cold” wallets. Change addresses periodically.
Ripple recommends that you rarely switch wallets or generate new addresses, if ever.
However, for large amounts of XRP funds, the practice of switching addresses periodically is common and very necessary to protect your funds.
Even if one service provider eventually offers all three types of Ripple wallets, you will still want to use multiple providers to protect yourself from one single service.
Some risks of using one service to hold or exchange your Ripple include:
- Service shuts down, is frozen, or seized by its government
- Discontinued support of your currency or wallet type â for example, Rippex
- Data breach as experienced by Binance or Mt. Gox
- Failure from a hardware implementation flaw
- Poor business ethics (in this wild-wild west of cryptocurrency with very few international regulations)
Cryptocurrencies like XRP have created some new and interesting variables in trading.Â Keep in mind that cryptocurrencies are not securities, and hence, do not behave as such.Â Be wary of anyone’s technical analysis about a specific cryptocurrency’s behavior.
In many instances, you can observe that the majority of the overall value of a cryptocurrency coin / token is held by about 1% of the total unique addresses â subjecting the values to significant price control.
You can also observe whale bots placing massive “buy walls” (to keep the price from rising) and “sell walls” (to keep the price from falling). These bots can then use high frequency trading to extract fiat-backed value in exchange for coins. Then, they buy back the coins at a lower value to regain their position.
It’s an incredibly vicious cycle that tends to take advantage of inexperienced traders, who panic sell or FOMO buy.
There is a lot of misinformation on the internet. Inexperienced traders need to be aware that fake news may be generated by social media bots and armies of rival cryptocurrencies. Ignore opinions unless they are verifiably fact-based and unbiased.
Do monitor the cryptocurrencies you’ve invested in by following their official blogs and social media accounts. Also, look for unbiased sources and quality forums. If you think you may have come across misinformation, research the claim through a variety of sources. Over time, you will come to recognize those that can be trusted.
Analyze the company and value of a cryptocurrency for its long-term potential. Smart investors never purchase more than they can afford to lose.
Questions to consider:
- Does the company provide a valuable service / have a legitimate use case (contracts, banking)?
- Does a major industry depend on the service it provides (to the point where the industry will bail out the potentially failing cryptocurrency company at its own expense)?
- Could the company accept a different form of payment for its service (is its coin / token essentially just a gift card, or does it serve an actual function / purpose)?
Most importantly, be informed and do your own research. Use common sense.
(This post is for informational purposes and is not investing advice.)