Bitcoin outperformed all the asset classes in 2020 to become the most valuable investment instrument. Its value has steadily risen in recent years and analysts predict that trend will continue in the future despite the short-lived market contractions. That has attracted several investors, including global corporations and individual traders, all seeking to profit from the bubble.
Unlike the traditional assets, Bitcoin is a new virtual asset that offers numerous profitable investment options. Mainstream crypto exchange platforms like ethereumcode provide various short-term and long-term investment alternatives for individual traders, asset managers, and investment companies.
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However, Bitcoin is also a highly volatile asset, with several risks such as cyber theft and fraud that could wipe out your entire investments in a flash. The following article discusses how you can avoid losing money when investing in Bitcoin.
Secure bitcoin wallet
Like bank account passwords, Bitcoin users have private keys for authenticating transactions. However, Bitcoin offers its users two options for storing their private keys; a cold wallet or a hot wallet. A hot wallet is online-based, allowing you to keep your private keys on an exchange or any other platform over the internet.
On the other hand, a cold wallet supports the offline storage of users’ keep your private keys. The storage can be a USB disk or any other device not connected to the internet. Cold wallets are usually the most secure because they are inaccessible online, making it impossible for cybercriminals to steal or compromise them.
Hot wallets are more convenient, enabling you to access your funds and transact anywhere. However, they are more susceptible to cyberattacks than cold wallets. Nevertheless, select a reliable Bitcoin wallet with enhanced security features such as two-step or multi-factor authentication to secure your funds.
Invest cautiously
Cryptocurrencies mainly gain value based on the public’s confidence in using them as investment instruments. Even the slightest negative perception about them could send their prices tumbling down swiftly. Consequently, positive perceptions could also boost Bitcoin’s prices up by a considerable margin rapidly.
Even savvy investors agree the crypto market could be very unpredictable sometimes. Thus, traders should invest cautiously, acquiring small amounts of Bitcoin, based on the market conditions. Exercising restraint could enable you to avoid significant losses in case the prices go against market predictions.
Invest through a trusted crypto exchange
The increasing Bitcoin’s popularity and projected crypto market growth have impacted the rapid proliferation of several fraudulent schemes. Fake crypto exchanges are among the most common ways that Bitcoin investors lose money. Criminals also use other unique strategies, including scamming emails to steal from unsuspecting traders.
Experts advise investors to use local exchanges based in their countries as one way to prevent fraud. Besides, crypto-friendly websites now exist, with listings of flagged crypto exchanges to protect investors and their assets. The listings will enable you to know the fake crypto exchanges and typical fraudulent investment schemes to avoid.
Spread your investments across multiple wallets
The Bitcoin network has incredible security measures but, traders can still lose money due to mistakes during transactions and hacking. Sometimes, you may also lose your private keys, making it possible to access the stored funds. That is why traders should also consider getting multiple wallets for different transactions. For instance, you can have two wallets; one for daily trading and another for holding your funds. The wallet for Bitcoin trading should only hold a small number of tokens, with the rest reserved for long-term investments. That would ensure you still have some assets left in case one wallet gets compromised.
Traders can lose money in various ways when investing in Bitcoin. However, you can prevent most risks by observing the above guidelines and staying abreast of the crypto market events and developments.
Bode Lawal, a financial expert writes from Lagos
