If you are a newbie in the world of cryptocurrencies, you may be slightly concerned about the safety issues inherent in the world of Bitcoin and other cryptocurrencies. In fact, you may even have wondered: are Bitcoins safe?
To answer that question of yours, we will delve into the various aspects of security that revolves around Bitcoin. The question can be interpreted in more than just one way.
Therefore, in this article, we will be exploring the possibilities surrounding the issue of Bitcoin’s inherent safety, both as an investment and as an asset itself.
The pioneering cryptocurrency clearly deserves a thorough analysis on both of these counts.
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How Safe Is Bitcoin As An Investment?
Any form of investment comes with its own sets of risks and caveats. Whenever you sign the documents concerning any investment instrument, you automatically agree to bear the set of risks that come with it.
All investments, be it in the form of stocks, gold bars or Bitcoins, come with the possibility that their prices will fall to a level where you will not be able to earn a profit on, or even recover the price you had originally paid for them.
Is Bitcoin more risky than other forms of investment? Somewhat, yes. This is because the price of Bitcoin has an extremely high degree of volatility. What does this essentially mean?
A high degree of volatility signifies that the price of Bitcoin stays stable relatively less often as compared to other forms of investment such as a gold bar. Bitcoin’s price tends to fluctuate quite a bit. Within a period of less than a year and a half, the price of Bitcoin has come down to less than a quarter of what it was in December 2017. Clearly, even in the short term, the price of Bitcoin cannot maintain much stability.
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While the returns may turn out to be quite huge, the risks of prices falling too low also remains rather high. Therefore, as an investment, the safety of Bitcoin cannot be guaranteed. However, if one is ready to brave the risks, the rewards can be quite significant.
How Safe Is Bitcoin As An Asset?
Bitcoin, like all cryptocurrencies, is stored on a blockchain network which is designed to be quite secure and to prevent risks of unauthorized access.
However, a security issue that does remain with regard to Bitcoin is the possibility of a 51% attack, owing to the fact that it continues to use the traditional Proof of Work consensus model, giving an advantage to mining pools with combined mining power.
Hacks and thefts are also not entirely uncommon with regards to Bitcoin. It is not a cryptocurrency that necessarily offers you any privacy but if you are careful about how your store your Bitcoins and how you conduct your transactions, you can easily keep yourself safe.
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