?What Are the Risks Associated With Bitcoin

?What Are the Risks Associated With Bitcoin

There are three primary risks associated with buying and owning bitcoins

Bitcoin’s value may decrease after you buy your bitcoins –

Someone could get access to your private key and take your bitcoins –

You could lose your private key that allows you to access your bitcoins –

The first risk is the same risk that’s associated with making any type of investment.

Whether you’re buying stocks, bonds, mutual funds, indexes or lending money, there’s a chance that the value of your investment will decrease or the other party won’t pay you back.

You may even lose your entire investment

Bitcoin is a particularly volatile investment, meaning the price may quickly move up or down.

If you buy Bitcoin and later sell it when its value is higher, you could stand to gain a lot of money.

Over the course of the 2020 calendar year, Bitcoin saw a low value of around $3,800 and closed out the year nearing the $30,000 mark, which clearly presents an opportunity for profit to savvy investors.

In recent years, however, people have made large Bitcoin investments only to watch the price drop from nearly $20,000 U.S. dollars per bitcoin to less than $3,500 USD per bitcoin over a relatively short time—over an 80% drop.

If you plan on getting into Bitcoin now, you may want to keep this in mind

The other risks are associated with your private key.

Technically, you’ll never physically possess bitcoins—Bitcoin is a digital currency after all.

However, a private key is what gives you the ability to spend or transfer bitcoins, which gives you ownership over the bitcoins associated with it

If someone gets your private key, they could transfer the bitcoins into their digital wallet, and you might not have any way to get your money back

Some people choose to store their private key on their own rather than using an online wallet.

They may do this by writing it down or keeping it on a storage device (like a thumb drive).

It’s a safe option, particularly if your storage device isn’t connected to the internet.

However, it opens up the possibility of losing your private key—and there are horror stories of people losing tens of millions of dollars worth of bitcoin after losing or throwing out storage devices

?What Are the Risks Associated With Bitcoin

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