How to invest safely in Bitcoin?
It is a well-known fact that Bitcoins can be hacked, and there is also a high chance that the value of the cryptocurrency may suddenly drop, leading to a significant loss of funds. In this article, we will discuss how to best manage these risks when investing in Bitcoin.
Steps to invest safely in Bitcoin
- Step 1: Ensure that you open an account with a reputable exchange:
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- Step 2: Secure your account with a strong password and 2FA
- Step 3: Transfer your Bitcoins to a cold wallet
- Step 4: Do not invest all your money in Bitcoins at once
Use a Reliable Platform
There are many scammers active in the crypto world, and many unsuspecting investors are lured in with promises of massive returns. Therefore, it is important to ensure that the platform you are dealing with is trustworthy. You can, for example, verify the broker’s registrations to ensure that the Bitcoins you buy are actually credited to your account.
Secure Your Account
It is recommended that you secure the account you use to purchase Bitcoins. Choose a strong password and use 2FA security.
With 2FA, you add an extra layer of security: you can only log in after entering a confirmation code on your mobile device. You can easily enable 2FA or Two-Factor Authentication within your Bitvavo account under settings.
Furthermore, be careful with emails that come from your crypto broker. Hackers sometimes engage in phishing: they try to steal your information, so they can hack into your account. By setting an Anti-Phishing code, you can ensure that the emails you receive are from your crypto exchange.
Diversify Your Investments
When investing large amounts, it can be wise to use multiple brokers. If one exchange fails, you can quickly switch to another exchange.
Just like with stock investments, it is also advisable to invest in different types of cryptocurrencies. This prevents you from losing your entire investment if Bitcoin suddenly fails. Therefore, research which cryptocurrencies you can invest in and diversify your opportunities.
It is also advisable to spread your Bitcoin investments over time. This way, you prevent investing your entire amount at the top of the market. By investing at different times, you apply dollar cost averaging and achieve an average return on the Bitcoin market which is much safer!
Use an Offline Wallet
It may also be wise to move some of your Bitcoins to an offline wallet. An offline wallet is also called a cold wallet and is not connected to the internet. This prevents hackers from easily accessing your Bitcoins.
However, it is important to remember your access keys. If you lose them, you will never be able to access your Bitcoins again. You will not be the first investor to lose a fortune in Bitcoins.
You can easily send Bitcoins from your crypto exchange account to an (offline) wallet. Keep in mind that there are costs associated with sending Bitcoins to a new wallet address since miners need to be compensated. Therefore, it is advisable to only send larger amounts of Bitcoins.
Beware of Scams
There are many scams when it comes to Bitcoin and other cryptocurrencies. If you want to invest safely, it is essential to learn how to recognize them.
For example, there are many ICOs (Initial Coin Offerings) where new coins without any value are sold at a high price. Because Bitcoin is a big hype, many people still decide to sign up. However, if there is no value behind the cryptocurrency, you will quickly see that the value can plummet.
Furthermore, be careful of pump and dump schemes. In a pump and dump scheme, a small group buys a certain cryptocurrency massively. The price can then rise sharply, after which more people decide to buy the coin. When the price has increased sufficiently, the initiators of the scheme sell the coin, after which the price collapses. Read more about pump and dump schemes here.
There are plenty of Bitcoin scams: therefore, be aware of the dangers when investing in Bitcoin and secure your investment!
Bitcoin security and privacy
Bitcoins have the image of being private: transactions are said to be difficult to trace. At a certain level, this is true, but you are not completely anonymous. Depending on what you do with the Bitcoins, your security can be at risk.
Bitcoin transactions are connected to a hash code, a unique identification code. When parties know which hash code is connected to you, they can also follow your transactions. However, a supercomputer is needed to download all transactions. Do you want to send transactions anonymously?
Conclusion: How safe is Bitcoin really?
Bitcoin as a means of payment is safe: due to the high level of cryptography and the validation of transactions by miners, data cannot be easily modified. In addition, all transactions are public, which makes it difficult to cheat within the system.
This does not mean that there are no risks involved when investing in Bitcoin. Hackers are always on the lookout, and the value of Bitcoin can plummet. Moreover, always remember your password: if you forget the login details of your account, no one can help you.
It is certainly possible to invest more safely in Bitcoin. However, it is important to take sufficient precautions. Just like with your bank account, it is also critical to ensure the security of your Bitcoin account. Furthermore, please remember that Bitcoin is highly volatile, and you may suddenly lose a large amount with a failed investment.
