If you’re just getting started at building your investment portfolio, it’s necessary to recognize that your cash holdings are not backed by physical materials such as gold or secured by any other valuable asset. With this in mind, in an inflationary environment, attributable to increased circulation of the fiat supply, you’re likely considering making your firsts investments into Bitcoin as a way to hedge against currency and other asset devaluation.
While Bitcoin is not that different from fiat in the sense that it too isn’t backed by any precious physical materials, it is stored on and secured by a specialized code called the blockchain. Bitcoin’s value is determined by the currency’s demand against a strictly limited supply. Unlike fiat currency, no additional units of Bitcoin can be created by a central bank or any other entity. As a decentralized currency that’s essentially stored on a network, there is no need for a bank, which means holders of this asset are responsible for securing it themselves.
What, then, is the safest way of going about storing your Bitcoin securely? If you already hold Bitcoin or other cryptocurrencies, the information to follow is meant to serve as a quick guide to safe and securely storing your crypto assets.
Your crypto will be foremost stored in a wallet, of which there are a few different categories. According to an article about storing Bitcoin by SoFi, “The two main categories of crypto wallets are hardware and software wallets, otherwise known as cold and hot storage.”
Hot storage is a wallet that’s stored online and where you hold a relatively small quantity of Bitcoin for spending on day-to-day transactions. You can keep this kind of wallet on a mobile device, which allows you to make these types of transactions easily and quickly. It’s essentially your walking-around money.
Your cold savings wallet, conversely, is more like your Bitcoin savings account and will hold the grand part of your cryptocurrency. The only time you’re utilizing this wallet is to replenish the hot wallet, and this cold savings wallet is stored entirely offline, preferably in a fireproof safe at your residence.
According to the experts at SoFi, “the most important part of choosing your wallet type and using your wallet is making sure your storage and transactions are secure.” Subsequently, there are a few steps to take to ensure you’re safely storing your Bitcoin. Firstly, you should use antivirus software to ward off viruses and malware that put your computer at risk for hacking and theft.
It’s likewise important that you backup your wallet completely, including its hidden and private keys. After installing antivirus software, this should be the first step you take in securing your wallet. Be sure that you use a strong password, and that you store it away. You should update your software regularly and as soon as those updates become available. Lastly, two-factor authentication should be utilized. This requires a password to be sent to another device, preferably a sim card, not a mobile phone, before you can access your wallet.
While Bitcoin fraud, statistically, is on the decline, down approximately 1.8 billion incidents over 2020, theft and hacking are still significant concerns. If you follow these simple steps enumerated above, you can protect your Bitcoin holdings against online security threats and keep your investment portfolio safe.
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