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Is It Safe to Invest in Bitcoin? Is Bitcoin a Safe Investment?

Dave Miller with Online Cloud Security

Dave Miller – Tech Enthusiast & Security Expert – January 20th, 2022

is it safe to invest in Bitcoin

On early November 2021, the value of the most popular cryptocurrency, Bitcoin, surged past $66,000. It had previously established a record of $64,899 in mid-April. This rise follows the introduction on Tuesday of the first U.S. bitcoin futures ETF on the stock exchanges therein. For more risk-adverse investors, this may beg the question, is it safe to invest in Bitcoin? Is Bitcoin a safe investment for the long-term? Is Bitcoin itself a secure cryptocurrency?

Cryptocurrency is attracting a growing number of investors. Of course, criminals are as well. According to a research by Crypto Head, a cryptocurrency news outlet that used FTC data to evaluate bitcoin crime patterns in previous years, reports of cryptocurrency crimes have climbed 312 percent per year since 2016. Investors’ coins can be stolen by hackers, or consumers can be duped into investing in cryptocurrency by con artists.

Due to its age and popularity, Bitcoin has the highest number of reported crimes of any cryptocurrency. Bitcoin’s security as an investment is frequently questioned because to the regularity and magnitude of its value volatility, aside from cybercrime.

Though fraud and theft have increased, many experts believe that the secure blockchain technology used by Bitcoin ensures investors’ safety and security, if not investment stability. In other words, is it safe to invest in the Bitcoin currency? Investing in Bitcoin can be risky, so here’s what you need to know about protecting your bitcoin.

Table of Contents

What is Bitcoin and How It Works

It’s not that difficult to understand how online digital currency works. Most of us are already used to moving money across online bank accounts.

Unlike traditional currencies, Bitcoin is a digital asset that functions in much the same way. Peer-to-peer payment mechanisms such as Bitcoin and Litecoin do not require banks to take a share of every transaction. The coins themselves do not exist in any form. Encrypted codes consisting of numbers and letters are used to generate each bitcoin. Code can be deciphered by re-running the identical equation that was used to construct it.

Why has the Value of Bitcoin Fallen? Is It Still Safe to Invest In?

Is it safe to invest in Bitcoin now? Well that depends. During the first week of December 2021, the price of bitcoin and several other popular cryptocurrencies plunged by a significant amount. According to data from Coinbase, the price of Bitcoin as of January 2021 is $46,800

That’s a far cry from the all-time high of $69,000 in November of last year. Due to significant inflation in countries, as well as fears of greater regulation for crypto investments, the recent turbulence has occurred.

Is Bitcoin a Safe Investment? Things to Keep in Mind

why Bitcoin is risky and not exactly safe

Your Bitcoin investment is not protected against price volatility. Investing in Bitcoin can be extremely risky if you’re falling for shiny-object syndrome. When it comes to “safe” investments, don’t put ALL your money into Bitcoin or any other one single cryptocurrency. The price of a single Bitcoin has swung from $30,000 to $60,000 in the last two months alone. It’s possible that other, lesser cryptocurrencies may be even more volatile than Bitcoin.

There are Many Risks of Using Bitcoin

being on the lookout for crypto scams

Many individuals are concerned about hacking and fraud when it comes to Bitcoin investing, as with any other digital activity. According to data from the Federal Trade Commission, there has been an increase in cryptocurrency crimes, with a median loss of $1,900 per report from October 2020 to March 2021.

If you’ve ever received an unsolicited promise to help you make money or boost your Bitcoin holdings, you’ve likely been scammed, according to the Federal Trade Commission. A scammer who insists on payment in bitcoin is a dead giveaway, according to the agency. Do your own research and buy your coins from a reliable crypto exchange instead of relying on unsolicited crypto offers.

Other Crypto Scams to Look Out For

Cryptocurrency Initial Coin Offerings (ICOs). A cryptocurrency ICO is akin to a new stock’s IPO when it is sold to investors before it is introduced onto the market. However, new coin offerings are sometimes faked, leading investors to place their money in a cryptocurrency that doesn’t exist in the real world.

Before investing in a cryptocurrency, do your homework and learn all you can about it. What appears to be an unbelievable offer is most likely a scam. As part of your due diligence, read the project’s white paper and interview the creators. Beginners should stick to well-established, well-known cryptocurrencies like Bitcoin or Ethereum.

Pump-and-Dump Cryptocurrency Schemes

A small group of investors can artificially inflate the price of a particular cryptocurrency while also persuading private investors to join in on the action. The initial investors then make a profit on the sale of their shares before the price drops once more. A similar program is available for more conventional assets as well. You should be wary of investments that appear unreasonably cheap. The Crypto Head research warns investors to be wary of coins whose value has skyrocketed with no apparent explanation. Pump and dump schemes may be at blame for this.

Volatility in the Bitcoin Market

Fans laud at the Bitcoin market as a market-disrupting emancipation, while personal finance professionals decry it as a potentially hazardous invention. Bitcoin is, without a doubt, a highly volatile currency. A roller coaster ride of ups and downs has been enjoyed by bitcoin since December 2020. Here are a few examples: Do you think the price of Bitcoin is about to go down?

The difficulty with cryptocurrency prices is that they are unsupported by any underlying value. Mark Northway, an investment manager at Sparrows Capital, explains that it all comes down to one thing: confidence.

How to Safeguard Your Bitcoin

Hackers can acquire access to Bitcoin or any other cryptocurrency wallets owned by individuals, as well as entire cryptocurrency exchanges. Because of this, it’s critical that you keep your Bitcoin in a secure location so that you can store your Bitcoin safely for the long-term.

Hot wallets, which are online but secure, are offered by cryptocurrency exchanges and third parties to store your funds. Money kept in an exchange or a wallet is not covered by the Federal Deposit Insurance Corporation (FDIC), which insures bank deposits. Keep an eye out for crypto exchanges and wallets with strong security features, such as cold storage and two-factor verification for user access. There may be private insurance coverage in place for exchanges in the event of theft or hacking, as well.

It is recommended by several experts to save sensitive information offline, such as a cold storage wallet like Ledger, in order to protect it from online fraud. Aside from these downsides of cold storage is the danger that you could lose your investment if you forget the password.

Cryptocurrency Privacy vs. Security

Even if you take precautions to protect your crypto assets from hackers and theft, Bitcoin may not be any more effective than any other traditional investment in keeping your personal information secret.

According to Kiana Danial, author of Cryptocurrency Investing for Dummies, she states that “security and privacy are two independent topics.”

Bitcoin transactions are not private, despite the fact that they may be more difficult to trace than transactions made with a credit card or a direct bank withdrawal. When you make a Bitcoin transaction, you’re tying it to your own personal hash code, according to CoinDesk‘s teach Editor Ollie Leech. Galen Moore, head of data and indexes at CoinDesk, explains that you aren’t anonymous at all, but rather pseudonymous

The blockchain is public, so even if your activity isn’t directly linked to personal information like your social security number, there are still ways for people to identify you. No one can see exactly how much anyone else has bought or sold even if Bitcoin transactions aren’t private. 

It would take “huge, massive, computational capability, like a supercomputer” to download the entire Bitcoin blockchain, according to Danial. “The average Joe can’t look into the Bitcoin blockchain and observe what transactions are taking place.”

Neither Bitcoin nor Ethereum, the second-largest cryptocurrency by market capitalization, are suitable for transactions requiring complete secrecy. There are other smaller cryptocurrencies meant to provide this level of privacy, but experts advise against investing in them. “All that transaction information being open is part of how the network is maintained as people observe,” says Moore of Bitcoin and Ethereum. The open system aids in the blockchain’s ability to keep track of transactions.

Keep Your Bitcoin Safe in a Cold Storage Wallet

A cold wallet is an offline storage device, like a USB stick, that is recommended by many cryptocurrency experts rather than keeping the crypto in a hot wallet (one that is online). The cost of a cold wallet storage device ranges from $100 to $200, but it is an effective way to prevent internet theft. As a cofounder of Decreed, a cryptocurrency with a market share of $1.5 billion, Jake Yocom-Piatt strongly recommends storing your cryptocurrency in cold storage immediately after purchasing it.

However, in addition to memorizing the private key password, you must also ensure that the device containing your bitcoins is safe and secure at all times. A hard disk containing 7,500 bitcoin was mistakenly disposed of by a man in Wales, resulting in a loss of $263 million at the time of this writing. There are a few Bitcoin providers who don’t enable you to connect a private wallet or transfer your Bitcoin out of their platform, such as Robinhood, SoFi, and PayPal.

Last But Not Least, Is It Safe to Invest in Bitcoin?

If you want to generate wealth for the future, you should not invest in Bitcoin. Add some crypto coins to your digital wallet if you’re looking for a solid investment. We should go with this option: Investments in growth stock mutual funds—which are far more secure than crypto—should be your priority if you’ve paid off your debts and have an emergency fund that can cover three to six months of costs.

Don’t be fooled by all the buzz and fall for it. Cryptocurrency investors have taken out loans and cashed in their 401(k)s, but that’s not a good idea. Do not put your financial future, your retirement ambitions, and the well-being of your family on the line. Investing in crypto is risky if you cannot afford to lose the money.

With long-term goals in mind, many cryptocurrencies like Bitcoin and Ethereum are developed. The long-term success of any cryptocurrency project isn’t guaranteed, but early investors could be well-rewarded if the initiative succeeds. To be regarded a long-term success, a cryptocurrency project must first gain widespread adoption. 

The network effect works in Bitcoin’s favor since more people want to acquire Bitcoin because it is the most popular cryptocurrency. A lot of people think of it as “digital gold,” but it may also be used as a type of digital cash.

Because the quantity of Bitcoin is fixed, unlike the supply of fiat currencies like the US dollar or the Japanese yen, investors believe the cryptocurrency will increase in value over time. There are a total of 21 million Bitcoins in circulation, whereas governments can print unlimited amounts of currency under central bank authority. Bitcoin is expected to rise in value when the value of fiat currencies declines. Those who feel that Bitcoin has the potential to become the first truly global currency believe that Bitcoin will be widely used as a form of digital cash in the future.

Due to the fact that cryptocurrencies like Bitcoin have historically exhibited absolutely no price correlation with the United States stock market, owning some can boost the diversity of your portfolio. When it comes to diversifying your investment portfolio, it makes sense to include some bitcoin if you think its use will grow in the future. Every cryptocurrency you invest in should have an investment thesis as to why that currency will be there for the long haul.

If you don’t want to take the danger of investing in Bitcoin, there are other methods to profit from the boom of cryptocurrencies. In order to get involved in the cryptocurrency market, you can invest in firms like Coinbase, Square, and PayPal, or in an exchange like CME Group. These companies may be lucrative, but they may not have the same upside potential as investing directly in bitcoin.

Conclusion

So is it safe to invest in Bitcoin? Investing in Bitcoin in 2022 will allow you to become a multi-millionaire, if you dedicate yourself to learning more about trading crypto and how it all works. However, you could also lose all your invested money. Is it possible that both of these things are true. Investing in Bitcoin has a high degree of risk, but the rewards might be enormous. Direct investment in Bitcoin is an excellent way to obtain exposure to the demand for digital currency, while equities of firms having exposure to Bitcoin can be safer but less rewarding.

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Dave Miller with Online Cloud Security

Dave Miller

IT Consultant at Online Cloud Security

Dave Miller is an IT Consultant for Online Cloud Security and has over 7 years of experience in the Information Technology space. He also specializes in repairing laptops & computers. In his spare time, he loves to talk about new technologies and hosts monthly IT and Cyber Security meetings in the Houston area.

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About Online Cloud Security:

Online Cloud Security is here to recommend you the most secure devices, from laptops to smartphones, we only want to provide you with products that we have tested and used ourselves for online security. Every product that we recommend is heavily inspected and tested for security against hackers, viruses, malware, and any other intruders that may want to steal your information. 

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Online Cloud Security Logo (500x500px)

About Online Cloud Security

Online Cloud Security is here to recommend you the most secure devices, from laptops to smartphones, we only want to provide you with products that we have tested and used ourselves for online security. Every product that we recommend is heavily inspected and tested for security against hackers, viruses, malware, and any other intruders that may want to steal your information. 

Recent Posts: