Bitcoin and other digital currencies regularly report volatile prices, but did you know that Bitcoin is safer than some financial systems? Despite volatility being an element of investing in crypto, other security factors are to consider. Bitcoin investors play the most prominent role in ensuring the safety of their currency. However, investing in Bitcoin carries various types of risks and responsibilities compared to the traditional investment of bonds, stocks and funds. Here are some key factors to consider.
Bitcoin value can be extremely volatile
Crypto investors swerved into the Bitcoin system after breaking the $20,000 target in December 2020 and sustaining its bull run into April, when its price skyrocketed above $64,000. However, Bitcoin started dropping months after that, and by early June, the spot price fell to below $32,000.
The long time crypto investors were aware of the volatility of Bitcoin since they witnessed it earlier. December 2017, Bitcoin had hit its previous high when the price came near $20,000, and a year later, the spot price dropped to below $3,400.
Although Bitcoin uses cryptography, it is not a safe investment because of its volatility. So when setting out to invest in Bitcoin, it is essential to understand its volatile nature; it can rise and fall rapidly in price, and it can also take ages to salvage its highs. Additionally, do not invest more in digital currency than you are willing to lose.
Keep Bitcoin cold storage devices safe
Therefore, many cryptocurrency experts advise moving Bitcoins into a cold wallet rather than keeping crypto in a hot wallet (online one). Cold wallets are offline storage devices that resemble a Universal Serial Bus (USB). The cold storage wallet devices range in price from $100 to $200, and they are essential for crypto investors since they can help get rid of online theft.
Also, you need to keep your physical device holding your Bitcoin securely, besides recalling your private key password; the latter is crucial if you dispose of your physical device. For instance, a man in Wales unintentionally disposed of his hard drive with 7500 Bitcoins, which would be valued at about $263 million during this writing period.
However, some Bitcoin providers do not allow you to link a private wallet and shift your cryptos off their platform. These Bitcoin providers include Paypal, Robinhood and SoFi.
Bitcoin scams on the rise
The number of scams targeting Bitcoin investors is in tandem with the Bitcoin surge in value. Most crypto investors lose coins by falling victims to Bitcoin schemes that cite quick returns; these sites use fake testimonials and crypto jargon to appear credible. For instance, according to Federal Trade Commission, 7,000 individuals lost $80 million to Bitcoin schemes promising quick returns.
Additionally, be on the lookout for phishing scams. You receive emails from a cryptocurrency exchange and attempt to reveal your crypto wallet details. The emails appear legitimate, branding and with correct logos. Therefore, the gurus’ advise the crypto community to refrain from clicking links in emails and replying to spoofed messages. Instead, the investors should directly contact the digital currencies exchanges in suspicious communication requesting your data.
A fake website can trick you into handing your personal information over to hackers. The Federal Trade Noted how the websites made investors assets look like they were increasing, but when they tried to withdraw supposed profits, the websites asked them to send in more crypto, and they ended up in vain.
Also, a lot of malware variants revolve around Bitcoin and Bitcoin wallets. Be wary of malicious codes that can gain access into crypto storage or crypto-mining malware that forces your computer to mine crypto for the hacker.
Keep private keys to access Bitcoin safe
Crypto starters need to make sure they keep their private key for the digital wallet safe and secure and ensure they can find it again. Several individuals have lost millions of dollars after failing to recall the password to their crypto wallets. Thus, it is essential always to use a password manager if you are prone to forgetting your passwords.
When you buy Bitcoin, you have the upper hand to ensure that it stays out of the reach of thieves. Bitcoin is unregulated by the government or any other third party; thus, there is nowhere you can contact to retrieve your password or report after falling prey to the online scammers.
In early 2021, as Bitcoin started to surge, there were warning stories in the media about newly minted multimillionaires blocked because they had lost their passwords.
Investing in Bitcoin and other cryptocurrencies is risky
Risk is innate in any investment, and it is more frequent in Bitcoin and other upcoming digital currencies. However, the challenges of trading crypto are related to its volatility; they are highly risky and speculative. Therefore, it is vital to know the risks before buying and selling currency.
There are many reasons Bitcoin is primarily secure, and the main is that it is built on a safe technology; blockchain. Other safety reasons are that Bitcoin; does not require permission, it is cryptographic, public and decentralised. While Bitcoin technology and blockchain are pretty safe, there are some risks to look out for before investing. These risks are: Bitcoin isn’t anonymous, the price of crypto can be highly volatile, Bitcoin relies on passwords, and crypto-wallets are not immune to fraud. Thus, it is essential to take the long view with your investment and never purchase more digital currencies than you are unwilling to lose. You should always purpose to keep a balanced portfolio.
