Thinking of investing in Bitcoin or already holding some coins? Whether you’re holding as an investment or looking to trade and make the most of BTC price movement, you need to ensure your coins are kept secure. Whenever you invest money, you’re at risk of its value going down. However, there are greater risks when using Bitcoin, as the public nature of the blockchain means your transactions can be found. In addition, your coins are only as secure as the wallet you keep them in, and if someone gains access to your private keys, they can steal the lot.
Before you invest in Bitcoin, it’s important to understand how it works and the potential risks. Proper risk management is a key part of any investment strategy. Employing the right security measures will give you peace of mind as your Bitcoin investment hopefully gains value. Here’s how you can keep your coins secure.
Keeping Coins on an Exchange vs Using a Wallet
To purchase Bitcoin, most people use online exchanges, which allow you to trade fiat currency for cryptocurrencies. There are lots of trusted exchanges now available and some users choose to keep their coins in their exchange wallet after purchasing. While this is the easiest option and allows you to freely trade without having to transfer your coins, it also comes with security risks.
If you keep your Bitcoin on an exchange and the platform is hacked or goes bankrupt, you may lose your investment. Unlike using a bank, your funds aren’t protected. In the past, exchanges such as Mt Gox, FTX and Blockfolio have collapsed, leading to users losing money they kept on the exchange. In many cases, exchanges have protected user funds in case of a hack, but this depends on the size of the hack and the exchange.
If you want to keep your Bitcoin secure, your best chance is to use a cold wallet. Wallets are an interface through which users can send and receive coins. Normally, they’re connected to the internet, which puts them at risk of hacks and other security breaches. However, cold wallets are offline and are therefore much safer to use. The one downside of this is that they’re harder to access when you need to sell or trade your coins.
When using a wallet, ensure you keep your private keys secure and safe. Back these keys up and check the wallet regularly to ensure all your coins are where they should be. Don’t share your private keys with other people. If you need to receive coins, you simply send your public wallet address.
Avoiding Crypto Scams
The irreversible nature of cryptocurrency means that you can’t get your money back if you fall victim to a scam. As a result, there’s an extra need for caution when using Bitcoin and other cryptocurrencies. Before you send your coins to anyone, consider how much you trust them and whether they’re likely to be a scammer.
Many companies now accept Bitcoin as payment, but ensure that the web address of the company is accurate and avoid sending coins to anyone or any company that doesn’t have a great reputation. Many crypto scams rely on people not having a proper understanding of how crypto works, so you can avoid most scams by educating yourself more on Bitcoin.
Managing Investment Risk with Bitcoin
Before putting any money into Bitcoin, it’s important to understand the risks and ensure you’re taking the right safety precautions. While trading and investing in cryptocurrencies has the potential to be profitable, it’s possible to lose money if you’re not careful. Keep your Bitcoin secure in a cold wallet and look out for possible scams.
