Trading and Storing Bitcoins – The Risks and Ways to Safeguard Them
The cryptocurrency market has been on a bullish run for quite some time now, with several cryptocurrencies hitting all time highs and breaking several resistance zones. At the time of writing this article, Bitcoin has surpassed 60,000 US Dollars, a 1200% increase from the 5,000 US Dollars range that it was trading at this time last year.
Despite the security and immutability of the blockchain ledger which cryptocurrency transactions are conducted upon, bitcoins aren’t exactly 100% safe and they do not guarantee financial success.
Risks Associated with Trading Bitcoins
Highlighted below are few risks associated with trading and storing Bitcoins:
- They are volatile: Sudden market sentiment by power brokers or world events can lead to a sharp change in market price which can go in either direction. A move in the opposite direction which the trader is in can lead to partial or total loss of assets.
- Wallet hacks: Just like normal currency, Bitcoins are stored in digital wallets. These wallets are hosted by a provider who is trusted with the safety of these assets. Users are expected to implement security protocols on their end too but things could go wrong on either end. In this eventuality, assets can be lost.
- They are unregulated: Bitcoins and other cryptocurrencies are at the moment, not regulated by any central bank or government. They exist in a decentralized marketplace, with no issuer or authority body. This means that nobody can be held responsible for anything that happens to the cryptocurrency.
Although the above look scary, there are several financial pieces of advice available online that can help you manage your assets the right way.
How to Safeguard Your Bitcoins
This article is focused on highlighting risks and also showing you ways to secure your bitcoins. A few of them are outlined below:
- Use Multi-Signature Wallet: Also called a multisig wallet, this kind of wallet is good for storing bitcoins for a long time. The security measure implemented here is to require the digital signature of more than one authorized user to be able to access the wallet. Getting the signature of one might be easy for hackers but it will definitely be difficult to get all in order to hack the wallet.
- Use Unique Authentication Method: The phone number, email address and password you use for creating and accessing your wallet should be different from the one you use for your other daily tasks. This is so that if they get hacked during your daily activities, the one you use for your wallet would remain safe.
- Use a Secure Network: Public Wi-Fis are unsecure and are notorious for having the highest rate of man-in-the-middle attacks. Cyber attackers stay on these networks to snoop through network data as they run through to the Internet, in order to steal sensitive user data. This may include but are not limited to financial data, social security number, personal accounts, etc. When trading or performing financial transactions, it is better to use mobile data or home Wi-Fi for added security.
