How to Safely Invest in Cryptocurrency

Is cryptocurrency safe? This is an important question to ask, especially given the recent spike in cryptocurrency trading and the government’s struggles to keep up with consistent regulation. The security or lack of security of cryptocurrency will continue to be a pressing issue for years to come, in all likelihood, as the global crypto market continues to grow and shows no signs of stopping. 

How Secure Are Transactions Done Through Bitcoins?

The answer to how safe crypto actually is, at least for the time being, is complicated. It is true that cryptocurrency does come with some security risks that you should be aware of before you make your first trade or consider crypto backed loans. Crypto is still a very volatile asset class, that is prone to big fluctuations in price. This relatively new and largely unregulated financial ecosystem does come with its share of scammers who look to prey on unsuspecting newcomers. 

However, crypto does have some security benefits too that make it very appealing. 

Is Cryptocurrency Safe? How You Can Safely Invest?

When someone asks the question of whether buying and selling cryptocurrency is safe, they might be asking one of two questions. 

  • Is cryptocurrency a risk investment that could go down in value quickly? 
  • Does crypto have security risks that could result in me losing money via a scam or another type of fraud?

These are different questions, so should be addressed separately so you can clearly understand the potential risks. 

Is Cryptocurrency A Safe Investment?

Compared to other asset classes, such as government bonds and stocks, investing in cryptocurrency could be considered very risky. 

Cryptocurrencies are legal across Europe and other areas, a lot of aspects of cryptocurrency do still remain unregulated, or could be subject to changing regulations. Fluctuating regulations are a part of what can make crypto markets more vulnerable to instability. A good example of this is the summer of 2021, when China cracked down on crypto-related activities, causing the price of Bitcoin to drop. There are many world governments deciding how to react to the rise of crypto, so there are a lot of factors that could contribute to the volatility of crypto moving forward. 

Another part of the volatility of crypto comes from the fact that it is still quite new, and investors may not know exactly what to make of it yet. Crypto does not yet have the same historical proof points as other asset classes, like stocks, so it can be more prone to huge price swings that come with changing investor sentiment. Some cryptocurrencies are more prone to this than others. Even Bitcoin, the oldest, biggest, and best-known crypto is prone to alarming price swings. 

If you invest in cryptocurrency, you can mitigate the risk by not buying more than you can afford to lose. There is still a non-zero chance of any crypto asset plummeting in value on a given day, so carry on with caution and consider a diversified portfolio of investments with crypto playing a smaller and more speculative part. 

Are There Security Risks Associated With Cryptocurrency?

Yes, there are some security risks that you should be aware of before you get into crypto. 

Paying with crypto does come with limited legal protections. Payments that are made with traditional debit and credit cards offer some security features that crypto doesn’t have. For example, in some cases, you may not be liable for any fraudulent purchases that are made in your name. This is not the case with cryptocurrency. If you lose your money to a scammer, there may not be a real way to get it back. 

Scams are common with cryptocurrency. Maybe you have already been sent one of those scam emails with a threat to reveal compromising photos of you if you don’t pay a certain amount in Bitcoin, or you might have received a strange message that congratulates you on winning a rare NFT or a large amount of cryptocurrency. In general, if someone is asking you to pay them in crypto and refuses all other types of payment, they could be attempting to steal your money. If someone is pressuring you to pay with crypto in any other way, chances are high that they are trying to scam you. 

Remember that you can’t take back a cryptocurrency transaction. A lot of cryptocurrencies use blockchain technology to create a secure public and uneditable ledger of transactions. This technology comes with some security benefits, but it also means that crypto transactions are usually not editable or reversible after the fact. If you pay someone with crypto, there is usually no customer service agent that you can call to arrange a refund if your purchase goes wrong for some reason. 

There are just a few of the security risks that are associated with cryptocurrency, but there are others that continue to come up as the crypto ecosystem evolves. If you’re going to try crypto, you should check the US Federal Trade Commission’s information about current scams so you can go in informed.

What’s The Most Secure Way To Buy Cryptocurrency?

With the rise of crypto, there has been a similar rise in the number of online exchanges and marketplaces where users can buy and sell crypto. As a general rule, the safer online platforms will usually ask you to prove your identity, as they follow Know Your Customer (KYC) and Anti Money Laundering (AML) guidelines. 

A lot of popular crypto exchanges, such as Coinbase, ask customers to verify information about themselves before they can get access to certain trading features. If you are just getting started in the world of crypto, it is generally a good idea to choose an exchange or marketplace that takes security seriously and implements steps like these to verify your identity. 

What’s The Most Secure Way To Store Cryptocurrency?

In most cases, the most secure way to store cryptocurrency is to keep it offline and away from those who might be able to use an internet connection to get their hands on your money. You can keep your crypto offline if you use a hardware wallet. This is also called a cold wallet or cold storage. Digital wallets, also called hot wallets, which can be kept online or on your desktop, could be more vulnerable to being stolen by hackers. 

There are several different kinds of crypto wallets that you can choose from, including hardware wallets that are offered by well-known names including Trezor and Ledger. The downside of these hardware wallets is they can be quite expensive to purchase, and you will need a recovery seed to get access back to your crypto in case you ever lose or misplace your cold wallet. Despite these challenges, cold wallets are probably the safest option for storing your cryptocurrency at this point in time. 

What Is The Most Secure Cryptocurrency?

To put this into simple terms, there isn’t one cryptocurrency that is the most secure. This doesn’t mean that some cryptocurrencies aren’t more secure than others. Cryptocurrencies like Bitcoin and Ethereum are said to have some built-in security features thanks to their use of decentralized blockchain technology, and the wider adoption of these cryptocurrencies could make them less prone to the huge price swings of other options. 

It is worth noting that security is part of the appeal of decentralized blockchain technology. Bitcoin itself was created in order to give buyers and sellers more security in their transactions and avoid the need for a trusted third party. If you are interested in cryptocurrency, the best way to stay safe is to do your research. 

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