“Is Bitcoin Safe?” is one of the oldest questions this cryptocurrency has ever faced, and it has never fully disappeared from the public consciousness. While crypto veterans typically know of Bitcoin’s safety profile, newcomers are often highly suspicious (or at the very least, curious) regarding it.
There are several ways we could tackle this question, but we’re going to view it through the lens of a Bitcoin long-term holder. This means we’ll focus more on the financial side of things– although architectural and structural elements will still get mentioned in the process.
Is Bitcoin a Safe Investment?
Bitcoin is a volatile asset, well-known for its dramatic jumps. This does not necessarily mean it is unsafe, but you need to be mindful that Bitcoin can be temperamental. However, despite its short-term price shifts, over the long-term, it tends to increase in price significantly.
Potential Risks of Investing in Bitcoin
Let’s highlight some of the biggest risks that come with a Bitcoin holding. It’s a good idea to keep these in mind before making a purchase.
Volatility
As mentioned, Bitcoin is deeply volatile. You need to be prepared for sharp rises and falls, as this is an unavoidable element of a BTC investment.
Regulatory Risks
Bitcoin, along with the entire crypto market, is in a vulnerable position on the world stage. Many countries are still trying to understand how to interact with it, and so they are all building and updating their regulations. Unlike traditional assets like gold or stocks, Bitcoin regulations are much less static, as there are many points that get debated and refined over time. This can affect its accessibility and public perception, which can also directly influence its price.
Crypto Exchanges Can Fail
The crypto industry has successfully bootstrapped itself over the years, but it has only existed for a little over a decade. Its youth means that there are many blemishes and issues which have arisen in its short span of time. Many popular exchanges have fallen apart and declared bankruptcy. The two biggest examples are Mt. Gox (2010-2014) and FTX (2019-2022). When this happens, it can affect user-funds if they have stored them on the exchange, as well as damage Bitcoin’s reputation.
Bitcoin Scams
While Bitcoin has proven itself to not be a scam (due to its strong economic fundamentals and robust architecture), there are many Bitcoin-related scams out there. Bitcoin can be hard to understand, and so malicious individuals take advantage of this and build false projects (such as Ponzi schemes, malware, and phishing scams) to pray on those who know no better. To avoid these scams, simply keep abreast of the industry and avoid anything that does not have credibility.
What's the most secure way to buy Bitcoin?
The best way to buy Bitcoin is to use a registered Bitcoin ATM or a regulated crypto exchange. Several of these are scattered around the world. You can check their validity online. This may be the most secure way, but for many people, it is not viable or accessible, simply because Bitcoin ATMs are not as common as regular ATMs.
The best balance between security and accessibility is to find an regulated exchange that has been recently audited, and has a good reputation. Of course, even the biggest exchanges can collapse, and so to avoid any issues, you should withdraw your Bitcoin from these platforms and place them in your own non-custodial wallet.
What's the Most Secure Way to Store Bitcoin?
As mentioned, placing your Bitcoin in a non-custodial wallet is highly recommended. However, it is not the only way forward. While many crypto fans believe that non-custodial wallets are the only suitable option, the truth is that you can leave your Bitcoins in the hands of a third-party, so long as it can demonstrate its trustworthiness. This should happen through audits and legal frameworks that ensure your money is safe.
This is one of the reasons why people keep holdings in their Ledn Bitcoin Growth accounts, as they have a proven track record of security and transparency. Another big reason is that Ledn’s Growth accounts allow you to earn interest on your Bitcoin, meaning you can gain a passive income.
What is the Most Secure Cryptocurrency?
There is no easy answer to this question, as security means different things to different people. However, Bitcoin is often considered at the top of the list. It currently has an unimpeached reputation, meaning that nobody has ever successfully hacked its blockchain or successfully attacked it. Not only that, but it is perhaps the most decentralized cryptocurrency network in the industry. This is in part because of its age compared to other crypto assets.
How do Cybercriminals Steal Bitcoin?
Despite Bitcoin’s security, there are still scams and exploits that happen to individual users. These are not exactly assaults on the Bitcoin network itself, but rather attacks on its userbase. These are some of the top methods that bad actors use.
Phishing Attacks
A phishing attack is where malicious individuals create fake credentials, websites, or even apps that represent reputable and real organizations. The aim is to fool users into entering sensitive data into these services, giving hackers all the information they need to drain wallets. Or, they could fabricate their identity to represent legitimate people, and then convince users to send Bitcoins directly to them.
Exchange Hacks
Exchanges have targets on their backs, simply because they store many crypto assets on them. This leads hackers to study them for exploits or weak spots. If something is found, then it is often capitalized on before the company gets a chance to patch or solve it.
Scams and Fraudulent Schemes
Bad actors often exploit the fact that the Bitcoin and crypto market is complex to understand for beginners. They create fake companies and initiatives that suggest (or even promise) good returns for often little work, with zero fundamental economic reasons. These can take the form of Ponzi schemes, pyramid schemes, or more complicated and specific scams.
Three Tips To Keep Your Bitcoin Safe
With issues like this existing, it makes sense that many beginners get anxious and uncomfortable about buying and holding Bitcoin. But thankfully, there are several simple things you can do to keep yourself safe and avoid catastrophe.
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Research the Services You Use
No matter what crypto-related project or service you use, you should research and critically analyze it. This means you must check to see if it has been audited by a reputable company, whether it is transparent in how it works (such as giving stats on its holdings, or if it is decentralized, then being open-source). Plus, see if its team is publicly displayed, and if you can find out information about them.
Keep Your Bitcoins Securely
If you decide to keep your Bitcoins in a non-custodial wallet, then it is best practice to use a cold storage wallet. This is a physical device that can store your cryptocurrency offline. They are generally considered safe, but you should research whatever brand or device you go for. If you choose to hold them via a custodial service or a centralized service, then ensure it is one that is trustworthy and transparent, such as Ledn that offers Growth accounts with a centralized approach.
Be Critical of All Products
Many companies, projects, and protocols in the crypto market are scams, or have suspicious elements to them. Never take anything at face value. Everything must be analyzed, and if anything sounds too good to be true, it is worth picking it apart and seeing whether you agree with its claims.
Why Hold Your Bitcoin With Ledn?
Earlier I stated that if you wanted to use a centralized service to hold Bitcoin, then you should look for one that is transparent and has a good track record. This is why many people turn to Ledn. Not only does the company’s assets and liabilities get regularly verified by a certified public accountant via a proof-of-reserve attestation, but also publishes its open-book reports giving you regularly updated knowledge about its inner workings.
Alongside this, Ledn allows you to earn passive income on your Bitcoin with its Growth Accounts. These are savings accounts that generate income on your BTC holdings, making them perfect for people who are planning to hold in the long run.
Conclusion
Perhaps the best way to answer the question of whether Bitcoin is safe, is to say that it can be. It just depends on how you engage with the industry, and what your tolerance is for volatility. If you stick with legitimate projects, and be open-minded to BTC’s sharp rises and falls, then you should be fine.
If you decide that holding Bitcoin sounds like a good idea, then you should think about placing it in a Ledn Growth Account and earning a passive income on it. This is a highly trusted service with a long legacy in the market, offering a great alternative to simply holding in a non-custodial wallet.
This article is sponsored by 21 Technologies Inc. and/or its subsidiaries (“Ledn”) and is for general information, discussion, or educational purposes only and is not to be construed or relied upon as constituting legal, financial, investment, accounting, tax, estate-planning, or other professional advice or recommendation. Please read Ledn’s full Risk Disclosure Statement and Disclaimers.
