Bitcoins and cryptocurrency have been some of the hottest news in investing in the past few years. They have been hot topics because they are new, and, as with all new things, they come with considerable risk attached. There is both good and bad news on the bitcoin front for those interested or already involved in cryptocurrency trading.
The Good News
The good news is that bitcoin has just passed the $11,000 price barrier, climbing up from a mere $1,500 two years ago. More money means more investors, and more investors mean greater demand for security. Security is essential with any kind of financial transactions, but they are especially tricky with cryptocurrency… and that leads to the bad news.
The Bad News
Bitcoin transactions require private bitcoin addresses, a private key, a personal password, all hidden in a digital wallet that allows you to make transactions. While this may sound like multiple forms of security, since they are all digital, it also equals multiple entry points for hackers to assimilate your funds. For instance, the Mt. God data breach in 2011 reported a triggered loss of around $450 million of Bitcoin that carried into 2014. Part of that major breach was due to compromised wallets and keys from investors.
Those hackers did not necessarily get rich off that breach either. Chainalyisis estimated that up to 23% of all Bitcoin created to date has been merely lost and out of circulation. At current levels, that would be worth around $3.66 billion. That is not money lost in the sofa or the laundry -- that is a significant amount of money.
Is It Safe to Invest Today?
There is a misleading sense of security when dealing with cryptocurrency that has permeated the market. The idea is that you don’t have to give lots of personal information, so it is safer than other forms of investing. Unfortunately, this is not entirely true. While the basic currencies do not require identity information, most of the helpful add-on services do. Hackers have been known to either harvest bitcoin from target accounts, or con investors into giving it to them. On a broader scale, significant losses in the bitcoin market could disrupt the economic stability of global markets. If there was a 23% loss within the global market, our financial market would be throwing a fit. Thankfully, bitcoin has not grown to that level of influence… yet.
Overall, the experts say that bitcoin is no more or less susceptible to security breaches than any other institution that receives personal identification information from you. That is not entirely reassuring though, especially in light of the infamous Equifax breach and the wide variety of online scams perpetrated every day. If you are looking for good investing advice, the age-old saying still stands: “Don’t put all your eggs in one basket.”
Let Us Know What You Thought about this Post.
Put your Comment Below.