Cryptocurrencies are known for being extremely volatile. Sometimes, they can decline as much as 40% but then witness a sharp increase soon after. Bitcoin is one of the oldest and the largest cryptocurrencies today. Investors commonly wonder is Bitcoin safe.
It is important to remember that compared to stocks and bonds, Bitcoin is not safe. The prices can be extremely volatile, which, in turn, may leave you reeling with losses. This is not the case with stocks and bonds.
However, this volatile nature of Bitcoin has a possibility of changing in the time ahead. It will make it relatively stable so investors can think of expanding their portfolio with it.
Learn more about the safety of Bitcoin as an investment.
Is It Safe to Invest in Bitcoin?
The world of crypto in itself is very risky and differs significantly from traditional investing in the stock market. With regards to crypto, it reached a high point in December 2017 when its price came closer to $20,000. Just a year later, the price went below $3,400.
In 2022, Bitcoin’s price went down from $48,000 to as much as $16,000. All this certainly makes one think that investing in Bitcoin is not safe. But there are ways to invest in it safely and not lose so much money.
Before you begin investing in Bitcoin, you must ask yourself the following questions:
- Do I know what I am investing in?
- Do I know the workings of Bitcoin and the cryptocurrency market?
- Will I be able to afford losing all my investment?
The Evolving Nature of Bitcoin
Bitcoin has been known for its volatile nature. However, crypto experts can discern a shift in its existing nature. With time, cryptocurrency is getting more and more embedded into the standard financial market. Institutional investors heavily invest in Bitcoin. It has now turned into a major alternative asset and you can equate it to a digital gold.
However, it does not mean that Bitcoin is fully safe and secure. Although it’s built on safe technology, the cryptocurrency still relies on passwords. In other words, it doesn’t guarantee full anonymity. It means that anyone can see the address of your crypto wallet.
Sophisticated hacking attempts can gather more information about the transactions. Ultimately, it puts your private data at risk. That is why crypto experts advise those for whom security is important to look for an alternative cryptocurrency. Still, one needs to appreciate the fact that in spite of these things, Bitcoin has survived for around 13 years.
How to Safely Invest in Bitcoin?
Bitcoin’s extreme volatility and security risks can make any investor afraid. Still, if you desire to invest in it, note the following points. They will help you gauge how safe Bitcoin will be for you.
1. Why Investors Buy Bitcoin
Bitcoin has zero inherent value. It has no profits, such as the stock market. Investors only purchase it because they think that its value will rise in the future.
Knowing this is important before investing in Bitcoin. You must understand that you are putting your money on a cryptocurrency that has no value of its own.
2. Know That Crypto Exchanges Can Collapse
You can lose your crypto if the crypto exchange collapses. This is not a new thing. Cryptocurrency exchanges have a history of failing. Some of the prominent ones include FTX.US.
Those who have been impacted by the fall of crypto exchanges have no guarantee that they will recover their funds in the future. The same is true with Bitcoin.
3. Bitcoin Fluctuates Wildly
As an investor looking to invest in Bitcoin, you need to have a tough heart. Bitcoin fluctuates wildly because of factors like supply and demand, user sentiments, media hype, and government regulations. They make this crypto highly volatile.
So, while investing in it, you must know that its price can fluctuate tremendously without your knowledge.
4. Storage of Bitcoin
Bitcoin can be stolen in a number of ways. Crypto exchanges with security vulnerabilities, phishing emails, and SIM swaps are just a few methods that cybercriminals employ. You should store Bitcoin somewhere safe electronically to eliminate these risks.
Never store crypto in an online or hot wallet. Store it in a cold wallet, which is an offline storage device, to prevent any chances of theft.
5. Stay alert about Bitcoin scams.
Bitcoin scams have impacted millions of people. Do you know that in May 2021, according to the FDA, nearly 7,000 investors lost up to $80 million in Bitcoin scams? They became victims of schemes promising massive returns in a short time. So, never trust any scheme promising massive returns. They are nothing but lies. Also, keep yourself updated about reports of these scams.
What Can Happen If You Invest $100 in Bitcoin At This Moment?
After learning about the safety of Bitcoin, you may be wondering if you can experiment with it. So what can happen if you invest $100 in Bitcoin right now or today?
The simple answer to this question is that we don’t know. Bitcoin’s value can increase or decrease according to how the market is performing. You can definitely start investing $100 in this cryptocurrency. But don’t be very sure about getting a good return. At the same time, do not have a negative outlook, as if the price of Bitcoin rises, you will experience gains.
If investing $100 does not hurt your budget and you can afford to lose it, go ahead and invest in Bitcoin. Who knows, if its price rises, you will get a better amount back in your pocket.
However, if $100 is something that you have managed to eke out from your budget, there’s no use purchasing Bitcoin from it.
You must research thoroughly before investing in Bitcoin. Bitcoin is safe for you only if you can deal with its highs and lows. If not, stick to stocks and bonds. They will ensure that you never find yourself in a state where you have lost considerable money. As always, do research thoroughly on your part before making a decision.