Is Bitcoin Cash Safe?
Bitcoin Cash’s safety as an investment is questioned most of the time due to the frequency and scale of its price volatility. So is investing in Bitcoin Cash safe? Here’s what you need to know about Bitcoin Cash’s safety as a digital currency and keep your cryptocurrency secure if you invest.
As cryptocurrencies become more widely adopted, the number of people who understand their intricacies increases. Unfortunately, this can lead to misinformation about the cryptocurrencies themselves, the algorithms involved, and the overall process in which they are created.
One recent example of misinformation is what's currently happening with Bitcoin Cash (BCH). There are many rumors circulating about BCH being a scam, completely insecure, or other forms of false statements, but there isn't much packed with facts to back up the claims.
However, being a fork of Bitcoin which has already been shown to be safe, the only risks associated with BCH are cybersecurity threats, crypto scams and careless trading.
But how safe is Bitcoin cash (BCH) as an investment asset?
In this short guide, we'll attempt to provide a definitive answer to this question. To be able to do that, we'll need to cover a few aspects that will determine whether Bitcoin Cash BCH is a safe or unsafe investment.
The first one is how to buy BCH correctly.
What To Consider Before Buying Bitcoin Cash (BCH)
The first thing to remember when buying Bitcoin Cash BCH is that it's still very volatile. This means that its price can go up or down just as fast as you bought it, so you should avoid big investments until the market stabilizes.
For instance, in late 2017, BCH gained more than 1000% in less than 2 months to hit its current all-time high price of $4,355.62. Then just as quickly, it dropped to less than $700 per coin in about three months.
Due to this volatility, BCH (or any other cryptocurrency in that matter) does not exactly fit the description of "safe".
This is why it is important that before you buy BCH, you know exactly what you are getting yourself into.
The best thing to do, according to experts, is to only invest money that you can afford to lose, particularly during the first few months after you buy it. You should also ensure that the amount of BCH you hold does exceed 5% of your portfolio.
If you are holding Bitcoin Cash BCH, you can keep it safe by storing it in hardware or a cold wallet. A cold wallet is an offline electronic device that can store your digital assets. The wallet is not connected to the Internet, which makes it impossible for hackers to access it.
Lastly, if you are buying Bitcoin Cash with fiat currency (i.e., US dollars), make sure that all transactions are made only through legitimate cryptocurrency exchange platforms. These include eToro, Coinbase, Coinmama etc.
Risks Associated With Bitcoin Cash (BCH)
The risks associated with Bitcoin cash BCH are greater than simply being a volatile investment asset. One of the biggest risks that currently exists is the threat of market manipulation, which is also true for many other cryptocurrencies. Hackers can change prices, trade volumes and order books on exchanges using phantom orders to drive up or down the price of BCH. For example, in 2017, the Bitcoin price was manipulated by using trading bots to create false buy or sell orders.
Another major threat associated with cryptocurrencies is that of scams and frauds. There are dozens of websites popping up each day purporting to be cryptocurrency exchanges but which actually turn out to be fraudulent operations designed only to con you out of your money.
Hackers and cybercriminals also create malware that is specifically designed to steal cryptocurrencies from your machine.
One of the things you need to be especially aware of when dealing with BCH and other cryptocurrencies is tax law changes. These could come in the form of new laws or stricter enforcement of existing ones. For instance, in 2018, the Internal Revenue Service (IRS) in the US declared all cryptocurrency transactions to be taxable events.
There is also the issue of fake ICOs, which are often used to scam investors out of their money. A fake ICO is one that appears to be genuine, but on closer inspection, proves useless.
Since it's nearly impossible for anyone outside the SEC or similar agencies to determine whether an ICO is real or not, you should only buy tokens from companies with a history of successful products and services.
Lastly, you should look out for crypto pump and dump schemes. These are designed to artificially inflate the price of a given cryptocurrency by coordinating large numbers of traders and investors who buy and sell at specific times.
This way, unsuspecting investors are lured into buying BCH and cause the price to go up. The original investors will then suddenly sell their stash and make a huge profit while everyone else makes a loss.
Read Also: Pros and Cons of Investing in Bitcoin Cash
The Best Way To Keep Bitcoin Cash (BCH) Safe
As you can see, there are many risks involved with holding Bitcoin Cash BCH or any other cryptocurrency for that matter. However, there are a few steps you can take to keep your money safe.
- Only invest an amount of money that you can afford to lose
- Storing your BCH in hardware or cold wallets
- Making sure that the platform from where you buy BCH is legitimate
Usually, when you buy BCH from an exchange, it is stored in a hot wallet. That means that the BCH are stored online, which makes it vulnerable to hacking. So, you will need to manually transfer them to an off-exchange cold wallet.
Storing your BCH in a hardware wallet will make it impossible for hackers to access and steal your coins.
When you use an exchange platform like CoinBase or eToro, make sure that all transactions and communications are made through HTTPS. This way, it will be impossible for hackers to eavesdrop on the communication and learn what you are doing.
There are many other improvements that could be made when it comes to cryptocurrency security, but so far, none have been able to properly balance convenience with safety.
For now, just do your research before investing in any cryptocurrency and ensure that you use all available resources to keep your money safe.
Also, remember that when it comes to cryptocurrencies like Bitcoin Cash, you don't want to put all your eggs in one basket. Keep your investment in more than one cryptocurrency just in case something happens to one of them.
Bitcoin Cash Security Vs Privacy
Bitcoin Cash as a cryptocurrency is independent of any centralized authority. This means that the network is untraceable and unlikable used, which can be for illegal activities such as money laundering and the purchase of illicit goods and services.
Due to its peer-to-peer nature, it also allows anyone with access to an internet connection and a computer to participate in the network and mine BCH without any special hardware or equipment.
This means that while it is more private than credit card payments, for example, it's still possible to track some information provided that you can make a direct connection between a person with access to funds and an exchange or wallet platform where they are stored.
Since the entire network is anonymous, however, it's almost impossible to track down someone who has gained access.
Bitcoin Cash is well-positioned to become the leading cryptocurrency for payments, especially in areas with low internet penetration and high mobile usage. It will take time before investors begin to trust BCH fully, but it's very possible that this digital currency will continue to grow and become even more useful in the future.
Although there are safety precautions that can be taken, they may not be enough to ensure your safety. The good thing is that most of the risks we have mentioned here cut across the board; they are not specific to BCH.
This means that the precautions you take for keeping your Bitcoin Cash BCH safe from hackers and other risks will also help protect other cryptocurrencies.
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Virtual currencies are highly volatile. Your capital is at risk.