Bitcoin and other cryptocurrencies continue to be a hot commodity and ever-popular in the business and finance world. Many people are still trying to get in on the cryptocurrency party, but getting started is sometimes harder than predicting your odds of guessing what the NFL lines will be in two weeks. But certain ones like Bitcoin are extremely hard to get into due to their current value.
But are Bitcoin and other cryptos worth getting involved with? Are there safety concerns to consider when investing in and dealing with crypto? There are some red flags that get raised by Bitcoin and other cryptos but they might not be enough to keep people from taking a risk on crypto. Let’s explore what kind of concerns there might be with Bitcoin and other cryptocurrencies.
Volatility
Volatility: Liability to change rapidly and unpredictably, especially for the worse. This is the definition straight from the Oxford Dictionary. Bitcoin especially, and other cryptos have been known to be extremely volatile and therefore have huge risks stacked on investing in them. This is the first red flag that is raised about concerns over cryptocurrencies. But let’s use Bitcoin as an example.
In late 2020, Bitcoin was pricing over $20,000 and continued to climb through April when it topped out at over $64,000. Sounds great, right? By mid-year, however, it had plummeted back down below $32,000. Still not bad if you got in at $20,000, but if you got in late when it was still rising and it was above $32,000, you may have just lost money.
Bitcoin and other cryptos can oftentimes ride crazy roller coasters of price changes because there are many moving parts that dictate the price. Supply and demand are there, but also the cost of producing cryptos that are often out of the hands of many people. News and regulations can also play an impact. Investing in crypto is just as risky as investing in the stock market, if not more so due to a lack of regulations surrounding cryptos.
Cold vs. Hot Storage
Storing Bitcoin and other cryptocurrencies is in the hands of the holder, especially when it comes to its security. There are major concerns to be had. Cryptocurrency is usually kept in a digital wallet held by the owner of the cryptocurrency. But there are two types of storage and each has its pros and cons.
Hot Storage refers to web-based, mobile, and desktop wallets that have access to the internet but are vulnerable to cyber-attacks. Hot storage is extremely easy to use, which is why they are so popular. It makes it very easy to buy, sell, and use. However, it is extremely vulnerable to online attacks which is why most keep a very limited amount of crypto in their hot wallets.
Cold Storage refers to wallets that are stored on devices without online access and have a physical aspect to them along with secure pins or passwords. These include air-gapped computers, hard drives, and USB drives.
These are very secure, as any theft would require physical access to the device along with any passwords. The downside is convenience and physical security. Users have to access the cryptocurrency from the device, in a hot wallet in order to buy, sell, and use.
There have also been nightmare stories about people who have problems with the physical function of the device they are using as cold storage. If access is not possible, the person has effectively lost that crypto with no hope of recovery, which could spell disaster with large amounts. People have also been known to lose passwords or mistakenly dispose of their device. Don’t be that person.
Conclusion
Volatility and secure storage can be two extremely large issues that face the buying of Bitcoin and other cryptocurrencies. These red flags can scare people away from investing due to the risks that are associated with cryptos.
But when it comes down to it, if you want to invest and make money in cryptocurrencies, the risk might be worth the reward. With big risks can surely come big rewards, and Bitcoin and other cryptos are no different.
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