Bitcoin has become a household name and is the largest and most “successful” cryptocurrency to date.
From volatile lows to all-time highs, it’s easy to see why Bitcoin has become such an interesting digital asset. More and more people around the world are noticing this and are more easily convinced to buy Bitcoin than they were 10 years ago.
but, Is it safe to invest in Bitcoin??
In this post, we’ll break down the risks of investing in Bitcoin, what steps you can take to secure your crypto, and whether BTC is still a good option for future investments.
Table of contents
Bitcoin market volatility risks
Bitcoin is known for its crazy fluctuating prices.
Compared to traditional commodities and investment assets such as gold or stocks, the value of Bitcoin can change dramatically over a very short period.
Most people will remember the Bitcoin boom in 2017, when the value reached an all-time high (up to that point) of nearly $20,000 overnight, before falling to only about $3,000 in 2018.
This incident did two things for Bitcoin:
1️⃣Put it on the global map and get recognition.
2️⃣Scare investors from wondering whether investing in Bitcoin is safe or not.
Jump into 2021, and Bitcoin reached another high, reaching a value of around $64,000 but later falling to $30,000 a few months later.
These types of examples scare away the majority of investors who are not well versed in investment strategies or do not understand how markets can work.
Compared to the S&P 500 and gold, Bitcoin’s returns are enormous.
So? What is driving these crazy Bitcoin prices and declines?
Speculation and predictionsFrom leading experts and investors, Bitcoin prices can be affected by expectations from analysis.
Media hype: News coverage and public interest can cause significant price movements. This includes the influence of social media like we’ve seen happen with Elon Musk.
Approvals: Prominent figures promoting or mentioning Bitcoin can cause a sudden rise or fall in the price.
For example, in 2021, Tesla announced that it had purchased $1.5 billion worth of Bitcoin. This raised the price of Bitcoin by 20% in one day!
Government involvement and regulations: The upcoming US elections and new SEC regulations could affect the price of Bitcoin for good or ill.
Is Bitcoin a safe long-term investment?
Despite being volatile, Bitcoin has a track record of being a great long-term investment to hold.
Over the past 10 years, Bitcoin’s long-term growth has outperformed any other asset, including stocks and gold.
Did you know?
On average, Bitcoin has returned 671% per year.
Someone who bought Bitcoin at the beginning of 2017 for about $1,000 would have seen their investment multiply dramatically to more than $60,000 today.
In comparison, short-term traders or emotional investors who did not review their risk tolerance may have sold during the crashes of 2018 and 2021.
Knowing how long to hold Bitcoin can be difficult for some with low risk tolerance. But remember that Look at historical data To make informed predictions about future returns.
Nothing is ever guaranteed, but compared to all other investment categories, Bitcoin continues to outperform them all.
What are the risks of investing in Bitcoin?
Like any other asset you invest money in, there are always certain risks as nothing is ever guaranteed.
Here’s a look at some of the biggest risks in the cryptocurrency space and what you can do to protect yourself.
How safe is Bitcoin from hackers?
Bitcoin’s security is based on blockchain technology, which is designed to be secure.
Since Bitcoin is decentralized in nature, this means that there is no single “entity” controlling the network. This system is what prevents Bitcoin itself from being hacked or manipulated.
However, the platforms that you and I may use to buy, sell, and store Bitcoin can be vulnerable.
A famous example of this is the hacking that occurred in 2014 metric tons. Gox The exchange lost about 850,000 bitcoins. This has opened the eyes of many and forced exchanges to improve their security features.
Ways to store your Bitcoin
The exchanges are fast and very useful for buying and selling Bitcoin and are suitable for frequent traders. However, you should never leave your Bitcoin storage on an exchange, but rather move it to a cryptocurrency wallet.
There are a variety of crypto wallets available. A self-custody wallet versus custodial options is the starting point and from there you can move on Software wallets, Hardware walletsand Cold storage.
Software wallets are convenient, but they carry serious security risks.
Yes, they allow easy access to your Bitcoin, but they are also prime targets for hackers and scammers.
The biggest risk of online wallets is that they are always connected to the Internet, which makes them vulnerable to phishing attacks, malware, and security breaches.
For more secure storage, your best option is to use one of the best hardware wallets available, such as a cold storage hardware wallet.
Cold hardware wallets, like Material Bitcoin, keep your Bitcoin 100% offline because they never store your private keys online. It is the best choice for long-term Bitcoin holdings.
The risk of losing private keys and how to avoid them
The biggest risk to your Bitcoin is losing your private keys. Your private key is like the password that gives you access to your Bitcoin, and if you lose it, you will lose all access to your assets.
This is true in use Autonomous wallets.
They are more secure options, as you have control over your private key but you also have more responsibility to protect your private key.
The famous example is Stephen Thomasa programmer lost the password to his digital wallet containing 7,002 bitcoins.
That would be worth $426,274,758 today.
To avoid these types of serious losses, use a cold wallet, along with a bare metal cryptocurrency wallet Recover the seed phraseit will always be your safest guarantee.
In case the cryptocurrency exchange fails
Cryptocurrency exchanges can be vulnerable to many issues, from hacking to poor governance to regulatory issues. When an exchange fails, users often lose access to their funds, sometimes permanently.
newly, FTXwhich was once one of the largest stock exchanges, collapsed and declared bankruptcy. Users ended up losing billions of funds that were frozen.
This does not mean that all stock exchanges will collapse, it is just a warning signal for you to never leave your assets on the stock exchange.
Remember quickly Transfer large amounts to a hardware wallet.
Secure your Bitcoins
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Store your Bitcoin |
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Encryption best practices |
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Is Bitcoin still a good investment today?
Despite its volatility, Bitcoin is still a very valuable asset. Regardless of its historical lows, it has always shown to bounce back and grow exponentially.
Looking ahead to 2025, experts expect Bitcoin to continue growing as cryptocurrency adoption expands globally and more mainstream financial institutions and governments take notice.
Did you know?
Standard Chartered Bank (a British multinational bank) has predicted that Bitcoin will rise to $120,000 by the end of 2024.
Should you invest in Bitcoin?
Investing in Bitcoin can come with high rewards and high risks.
That’s why they understand Pros and cons It can help you with your investment strategy:
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Including Bitcoin as part of your investment strategy is a great way to diversify your investment portfolio.
You may have already invested Stocks, Bondsand Real estateAnd investing in it Bitcoin This is another valuable asset you can add to your list.
Frequently asked questions
Is Bitcoin safer than paper money?
- Bitcoin is safer in terms of decentralization, but fiat money offers more government oversight and insurance, such as Federal Deposit Insurance Corporation (FDIC) protection.
How does regulation affect Bitcoin security?
- Regulation improves Bitcoin security by protecting investors, however, it can vary from country to country. It is important to note that regulating Bitcoin goes against the fundamental value of cryptocurrencies because they are built on decentralization.
What happens if I lose access to my Bitcoin wallet?
- Losing your private keys means losing access to your Bitcoin forever. Make sure to back up your wallet using seed phrase recovery and store your private keys in a cold wallet.