Whether you are buying conventional shares from a stock exchange or Bitcoin from crypto exchanges, all of these investments come with their own risk factors. However, the volatile nature of Bitcoin makes it a bit riskier than conventional stocks but with higher risks comes higher chances of making a profit. In addition, investing in Bitcoin without appropriate knowledge about the crypto market can further add to the risk associated with the investment.
Nonetheless, it would be fair to say that investing in Bitcoin is not as risky as it used to be. This is primarily because of technological advancement and increasing acceptance by global financial institutions. This has also resulted in Bitcoin garnering more legitimacy in finance. However, if you are still worried about the risks associated with Bitcoin investments, continue reading to learn more.
Potential Risks Associated With Bitcoin Investments
In a conventional sense, there are three primary risk factors associated with Bitcoin investment. These factors include the volatile nature of the crypto, the risk of some accessing your private key, and losing your private key, restricting your access to Bitcoins.
The first risk factor is prevalent with almost every investment you make. For instance, suppose you invest in a specific company’s stock, and due to some unforeseen reasons, the company goes bankrupt the next moment. Unfortunately, there have been many cases of this sort leaving the investors with no choice but to wash their hands of the investment.
However, when it comes to investing in Bitcoins, the short-term nature of the crypto might be volatile, but at least you would not have to worry about losing your investment over a corporate fraud. This means that investing in Bitcoins for the long haul can increase your returns to a great proportion.
Furthermore, the risks associated with private keys cannot be changed, but they can always be mitigated. One needs to understand that Bitcoins are digital currencies, and the private key is the only way to access Bitcoins. This is very similar to the mechanism of the password of your social accounts, where if anyone gets hold of the password, things will be bad for you.
Therefore, it is always recommended to store your private key safely and securely to mitigate the risk of being stolen or lost. This is also why many people choose to store their private key in a separate physical storage device rather than the online wallet. This is a very safe option, especially if your device has no access to the internet.
Apart from that, there is always the risk of losing your private key, in which case there is no one else but you to be blamed for it. However, one effective way to deal with this would be to store your private key in two or three different storage devices and keep them in separate and secure locations.
How To Keep Bitcoins Safe?
Keeping your Bitcoins safe is not as challenging as one might think. For starters, you need to store your private key in a secure location such as an app or a physical device that is not connected to the internet.
Other than that, you can also store your private key in a non-digital format, such as written on a notebook. Storing your private key anywhere without access to the internet is called a cold wallet.
In addition, certain platforms will allow you to keep much of your Bitcoins in cold storage and the other small percentage in the hot wallet that is the wallet connected to the internet.
Apart from the risk risks associated with your private key, there are also risk factors associated with crypto scams. These are very similar to bank scams where scammers can get you to share your private details and empty your wallet before you know it. In addition, there are many ways scammers can access sensitive information from your device. Therefore, ensure the security of your device, especially when connected to the internet.
Safe Ways To Invest In Bitcoins
There are many ways to invest in Bitcoins safely and securely. Some of these well-known procedures include:
- Investing Through ETFs: Direct investment in Bitcoins can be a hassle for anyone. However, leveraging Bitcoin ETFs can help one mitigate the risk as ETFs will mimic the price of Bitcoins, but one would not be investing in Bitcoins directly.
- Crypto Conversion Platforms: The other safe alternative for investing in Bitcoins is crypto conversion platforms. These platforms will provide you with an easy alternative to convert your fiat currency into Bitcoins and vice versa. Further, the process of buying Bitcoins through crypto conversion platforms is very straightforward, as all you need to do is visit Coingate and buy cryptocurrencies like BTC, LTC, ETH, and many others through credit cards and other payment methods.
Should You Invest In Bitcoins?
There are many ways to invest safely in Bitcoins, but investors need to go ahead with appropriate knowledge of the crypto market. Other than that, diversifying the portfolio can also mitigate the risks. Therefore, make sure to do your homework and tread with caution for safer outcomes.
Photo credit: The feature image has been done by Elnur_.
Editorial notice: Risk is an essential part of investing, so please be careful with your funds and what you do with them. No matter where you put your money, make sure to read the fingerprint and make due diligence checks.