Is Crypto Safe?

is crypto safe

Many people are eager to invest in cryptocurrency, fueled by excitement over the digital asset’s recent rise and the promise of big payouts. But as with any new investment, it’s important to know the risks and understand how to protect yourself. The cryptocurrency market is volatile, regulators are still catching up, and there have been numerous high-profile hacks, scams and frauds. And given that the value of cryptocurrencies fluctuates so dramatically, a bad decision could leave you with nothing.

Cryptocurrency isn’t backed by any government or central bank, so it’s not protected by the same laws as a traditional currency. Holdings in online “wallets” aren’t insured like U.S. bank deposits are. And unlike stocks and bonds, a cryptocurrency’s value can drop significantly in a short period of time. This makes it a very risky investment, and one that should be limited to a small percentage of your overall portfolio.

Scams and theft are also common in the crypto space. Crypto thieves are often looking for private keys, which give them access to tokens and allow them to move funds between different wallets or exchanges. Those keys can be stolen through hacks of exchanges or wallets, or simply lost if you forget them. To combat these risks, conventional wisdom says it’s best to keep crypto in a secure “cold storage” location, such as a computer that’s disconnected from the internet or a specialized USB device called a hardware wallet. However, that’s not an option for most people, and even devices like the Ledger or Trezor cost between $120 and $220.

Similarly, crypto investors should be wary of any opportunity that promises big returns or guarantees, because those promises are usually fake. And never give out personal information to anyone who contacts you through email or social media, and be wary of any messages that claim to come from Amazon, Microsoft, FedEx, your bank or other well-known companies. These are likely blackmail attempts, designed to trick you into sending them money.

If you’re thinking of investing in crypto, be sure to read up on security best practices, and stick to popular coins on reputable exchanges. And always invest with money you can afford to lose, and only if it fits within your overall investment portfolio.

For more information on the benefits and risks of crypto, visit EarlyBird’s full guide. And don’t invest in anything without first talking to your financial advisor or tax professional. All investments involve risk, including the potential loss of principal.

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