Cryptocurrency has piqued the interest of investors like never before. Criminals are as well.
According to research from Crypto Head, a cryptocurrency news organization that used Federal Trade Commission data to analyze cryptocurrency crime patterns in previous years, reports of cryptocurrency crimes have climbed 312 percent every year on average since 2016. These crimes can range from hackers stealing investors’ money to people falling for cryptocurrency investment scams.
Bitcoin has the most reported crimes of any cryptocurrency, which is understandable given that it is also the oldest and most commonly owned. Aside from digital crimes, Bitcoin’s financial safety is frequently questioned due to the frequency and magnitude of its value volatility.
Despite a spike in fraud and theft, many experts claim that Bitcoin investments are safe — at least in terms of cybersecurity, if not investment stability — because of secure blockchain technology. So, is it safe to invest in Bitcoin? Here’s all you need to know about Bitcoin’s asset safety and how to keep your bitcoin safe if you decide to invest.
What to Think About Before Purchasing Bitcoin
First and foremost, the money you invest in Bitcoin is subject to value changes.
Bitcoin is an extremely risky investment. Don’t invest in Bitcoin — or any cryptocurrency for that matter — if you’re seeking for a “secure” investment with guaranteed profits. The price of one Bitcoin has ranged between $30,000 and $60,000 in the last few months. Bitcoin isn’t the only risky cryptocurrency; smaller coins may be more worse.
“Understand that these are really volatile assets,” says Dan Herron, a CFP with Elemental Wealth Advisors in San Luis Obispo, California, “so if significant movements cause you to lose sleep, this isn’t the market for you.”
For this reason, experts advise keeping cryptocurrency investments to less than 5% of your whole portfolio – and to ensure you have a good traditional retirement investment strategy in the first place. Before investing in Bitcoin or any other cryptocurrency, it’s also a good idea to establish an emergency fund and pay off any high-interest obligations.
What Are the Risks Associated With Bitcoin?
The possibility of hacking and fraud is the most common security issue for many people when it comes to Bitcoin investing, as with any other digital activity. According to data from the Federal Trade Commission, cryptocurrency crimes are on the rise, with a median loss of $1,900 per report between October 2020 and March 2021.
According to the Federal Trade Commission, scammers frequently request payment in cryptocurrencies or send unsolicited proposals to help you make money or increase your holdings. “Anyone who says you have to pay in cryptocurrencies is a solid sign of a scam,” the agency warns. You should also avoid any crypto-related unwanted pitches; instead, do your own research and buy your coins from a trustworthy crypto exchange.
How to Keep Your Bitcoin Safe
To steal bitcoin holdings, hackers can acquire access to individuals’ crypto wallets or entire cryptocurrency exchanges. As a result, it’s critical to keep your crypto in a secure location and to follow good digital security behaviors.
Hot wallets, which are secure but remain online, are offered by cryptocurrency exchanges and third parties as a means of storing your funds (and therefore still susceptible to hacking). Cryptocurrency housed on an exchange or in a wallet is not protected by the Federal Deposit Insurance Corporation (FDIC), as is money held in a bank. Make sure you trade and store your crypto on a platform with strong security features, such as cold storage for a major portion of your holdings and two-factor verification for users. In the event of theft or hacking, certain exchanges may even have private insurance plans.
Many experts propose cold storage using an offline device that is not linked to the internet, such as a USB drive, for the best security against online fraud. However, even cold storage has its drawbacks, such as the chance of losing total access to your investment if you lose your password.