Now that Bitcoin has hit astronomical levels, there is a renewed interest in it by the masses. Things went a bit quiet for a while regarding Bitcoin and cryptocurrency in general after the big crash of three years ago. That was a moment when Bitcoin went from a few hundred dollars in value to almost $10,000 in a very short time. Then it crashed down to below $3,000.
Now it is hovering somewhere around $40,000, and people are thinking of buying in. They want to know how safe it is, though. After that crash, it is natural to wonder if the factors that caused it last time around could happen again.
In this article, I will go over several of the things to keep in mind before you buy Bitcoin or other cryptocurrencies to keep your investment safe.
1. Pick a good wallet
A digital wallet for cryptocurrency is not a wallet at all. And they take on different forms, as well. In reality, these wallets are just digital signatures that show where on the blockchain your currency resides. As such, they can be very safe or easy for people to intercept your data and take your coins.
If you don’t know how to buy Bitcoin, the process goes like this: You use your fiat currency to buy the Bitcoin on an exchange. Then you need to put the address of the coins in your digital wallet. To keep them safe, the best thing is to use a cold wallet, which is more like a flash drive that is incredibly secure and stored offline. Once you unplug it, nobody can access your wallet at all. Unless they are able to steal your actual drive from your home or wherever you store it. So, make sure it is in a secure location.
2. Don’t invest what you can’t afford to lose
This advice goes for any type of investment that goes way beyond cryptocurrency. Bitcoin has a reputation as being volatile because of those crashes, but in reality, any investment presents the same risks.
Make sure that when you buy, you understand that there could be a crash, and it could lose value. In which case, you need to be able to focus and have the patience to wait out a dip or crash. Usually, over time the value will slowly increase, and you will at least recoup your investment. It takes courage to not panic and sell it as it is losing value.
3. You don’t get your money back
Since the blockchain is so secure, if you send your Bitcoin to somebody else, there is no way to reverse the transaction. This is a good and bad thing. If you make a mistake and send it to the wrong address, then there is no way to get your money back. You can’t get in touch with the owner of that wallet and ask for your coins back.
This does help you when you are the one getting the money as the sender can’t scam you out of your coins by doing a chargeback afterward.
*This article has been contributed on behalf of Paxful. However, the information provided herein is not and is not intended to be investment, financial, or other advice.