Bitcoin’s journey has been a rocky one, there’s no doubt in that. Having risen to above $20,000 before falling to as low as $3K, it’s no wonder that speculative investors are wary – they have every right to be with something as volatile as Bitcoin. For this reason, many people wonder if Bitcoin offers buyer protection. In this guide, I’ll be shedding some more light on this aspect of investing in Bitcoin.
No, Bitcoin does not offer buyer protection since it is decentralised cryptocurrency. There is no company behind Bitcoin, therefore, there is no inherent buyer protection attached. On the other hand, there are means in which you can protect your investment such as storing it securely and using risk-aversion methods.
What is Bitcoin?
Bitcoin is a decentralised P2P (Peer to Peer) digital asset, which means that no one controls it. Everyone who runs a Bitcoin moner contributes to the healthy state of the network. It’s well-known for being the first asset of its kind in history and was created by an anonymous person who goes by the name of ‘Satoshi Nakamoto‘.
There will only ever be 21 Million Bitcoin in existence, this is hard-programmed in the network and many think that this is one of the major reasons it is so valuable to many, because of the scarcity. In reality, there are a lot less than 21 Million since people have lost them like this one man who threw away $80M worth of Bitcoin several years ago.
How can I protect my Bitcoin investment?
As I mentioned above, although Bitcoin does not offer buyer protection since it is not a regulated asset or public company, there are steps you can take to protect your investment in Bitcoin.
Firstly, you have to make sure that your Bitcoin is stored securely. To do this, you need to buy a hardware wallet like the Ledger Nano X. This means that in order for anyone to steal your Bitcoin, they’ll have to physically steal your device, and even if they manage to do this, it’s unlikely that they’ll be able to get into the device without your passcode.
Using stop-loss orders
If you want to protect your Bitcoin investment from price declines, you can always use something called a stop-loss (or stop-limit) order. This is essentially something which lets you say ‘If Bitcoin drops below x, sell it’. This way, you can invest with the peace of mind that you won’t lose any more than a certain amount of money. Most people don’t do this since they view Bitcoin as a long-term alternative investment strategy, although it remains an option for the more risk-averse investor. To do this, you’ll need an account with a crypto exchange like Coinbase and then follow the instructions listed on this support article.