Is Cryptocurrency Safe to Invest in 2025? How to Avoid Crypto Scams

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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.

Cryptocurrency is known for its parabolic price moves and minting millionaires during bull runs, but is cryptocurrency safe? The answer is more complicated than it seems because there are several ways to measure safety. Price stability provides one measurement, while the security of the blockchain, regulatory environment, and even the way we manage crypto wallets all play a role in the question, “Is crypto safe?”

In this guide, we’ll explore the safety of investing in crypto, as well as the steps you can take to reduce risk. Is Bitcoin safe? Is crypto safe to invest in at all? Let’s find out together.

Summary: Is Cryptocurrency Safe to Invest in?


How risky is cryptocurrency? The answer may depend on where you are in the world and how well crypto assets fare against the local currency. Cryptocurrency provides an alternative to traditional fiat currencies like the US dollar. While the dollar is holding strong relative to many other currencies, inflationary pressures have reduced buying power dramatically in recent years.

In other parts of the world, inflation has skyrocketed. According to the International Monetary Fund (IMF), inflation exceeds 25% in a dozen countries worldwide, with the highest inflation rate in Argentina (250%).

By that measure, many types of cryptocurrency are safer than some national currencies. However, price versus inflation aside, we also have to consider the safety of cryptocurrency itself. A core group of blue-chip cryptocurrencies is considered to be safer than others. These include top assets like Bitcoin and Ethereum that have proven security and enjoy a robust worldwide market.

Many cryptocurrencies can be extremely volatile, moving between parabolic price moves to 50 or 60% swoons. Investors often buy crypto assets as part of diversified investment portfolios, exposing them to potentially outsized gains without concentrating price risk on one type of asset. Investing in any crypto asset can be much safer with proper diversification and a solid education on how to avoid crypto pitfalls.

How to Safely Invest in Cryptocurrency


Unlike traditional finance, investing in crypto does not involve financial institutions or financial safety nets such as FDIC or SIPC insurance. Instead, cryptocurrency allows people to control their assets with self-custody crypto wallets. That self-custody also comes with a learning curve we’re not accustomed to with traditional finance. Let’s look at the basics you’ll need to consider to invest in cryptocurrency safely.

1) Educate Yourself on Crypto

Before investing a penny, it’s wise to educate yourself on cryptocurrency. The CryptoNews Academy provides guides on the most important aspects of the crypto world. First, learn what a cryptocurrency is and how crypto assets differ from traditional currencies. You’ll also want to learn about the different types of cryptocurrencies. For example, Bitcoin now serves as a store of value due to its wider adoption and fixed supply. However, other cryptocurrencies, such as Ethereum, act as a gateway asset to a broad range of decentralized applications and trading markets.

2) Set Up a Secure Wallet

A self-custody crypto wallet offers the most secure way to store your cryptocurrency. By holding your cryptocurrency yourself, you avoid the risks associated with keeping your assets on a centralized exchange or using a third-party custodian.

metamask crypto wallet

You’ll need the right type of wallet for the type of cryptocurrency you want to buy. Blockchain networks are incompatible with other chains in many ways, so you can’t store Bitcoin in an Ethereum-only wallet. However, many wallets allow you to hold multiple types of crypto, including several hardware wallets, which we’ll discuss in just a bit. Most people start with a software wallet app, many of which operate as browser extensions or mobile apps.

A crypto wallet offers a secure way to store the private keys that control your cryptocurrency on the blockchain. You use your crypto wallet to sign cryptocurrency transactions, proving you control the private keys. When you first set up your wallet, you’ll generate a seed phrase, also called a recovery phrase, a human-readable version of the wallet’s private key. Anyone who has the seed phrase or private key can recreate your wallet remotely and access your assets on the blockchain.

Wallet Seed Phrase Safety

Follow the tips below to protect your private keys and wallet seed phrase.

  • Never share your private keys. Although usually hidden from the main UI of a crypto wallet, your wallet’s private keys let you or anyone else restore the wallet remotely.
  • Never share your seed phrase. The seed phrase is generated when you create a wallet. Anyone with access to the seed phrase can access your crypto assets.
  • Store your seed phrase safely. You’ll need the seed phrase or private key to restore your wallet if needed. If your computer crashes, for instance, you might lose access to the wallet. Don’t store your seed phrase online, however, or in an unencrypted file on your computer. Instead, write it down and store it somewhere safe.
  • Keep another copy of your private seed phrase. Plan ahead for mishaps like fires or floods that could jeopardize your copy of your seed phrase. Consider other locations for duplicate copies. Some people use metal engravings to store their seed phrases.

3) Choose a Reputable Exchange

Some countries provide a safety net to protect depositors if a bank collapses. In the US, we have FDIC insurance for deposits up to $250,000, and the customers of failed banks are usually transferred to another bank. Similarly, SIPC insurance protects against brokerage insolvencies. However, crypto exchanges come with no such safeguards, and several high-profile cryptocurrency exchange collapses, including the FTX collapse, have cost investors millions.

Look for a reputable exchange with solid financials. Coinbase stands apart in this regard because, as a publicly traded company, it shares its quarterly earnings and balance sheet.

coinbase security

Many also consider Kraken to among the more trustworthy exchanges. While Kraken is not publicly traded, the exchange publishes proof of reserves so you can verify that the exchange really holds your crypto.

Much as with a bank or brokerage account, it’s also essential to use a strong password that isn’t used elsewhere. Modern browsers can suggest a strong password that’s virtually impossible to break with brute force attacks. It’s also wise to enable two-factor authentication (2FA), preferably using an authentication app rather than text messages. Countless cases of sim-swap and port-out scams underscore the reason to avoid using SMS text messages for 2FA.

The Most Secure Way to Store Cryptocurrency


We discussed software wallets earlier. However, hardware wallets offer the most secure way to store your crypto. A wallet app, also known as a hot wallet, generates and stores the wallet’s private keys on a device connected to the internet, such as a computer or mobile phone. By contrast, a hardware wallet, also called a cold wallet, generates and stores your private keys on a separate device that’s not connected to the internet.

Most hardware wallets connect via USB and allow you to approve transactions by pushing a button on the device. When you’re done transacting, you can disconnect your device and store it safely.

Ledger and Trezor hardware wallets were among the first hardware devices available and remain popular today. Leading brands like Ledger and Trezor also enjoy wider support for popular software wallets. In this case, you can use a hot wallet like MetaMask to connect to decentralized applications while safeguarding your crypto with a Ledger hardware wallet.

ledger hardware wallets

While most software wallets are free to use, hardware wallets require a purchase. Less expensive models start at about $60, while models with more features can reach up to $300 or more.

Despite the cost, a hardware wallet offers much higher security for your crypto, and many support multiple blockchains. However, be sure to buy your wallet from a trusted source, ideally directly from the manufacturer. A used crypto wallet or a wallet purchased from a questionable source may be compromised.

Biggest Risks When Investing in Cryptocurrency


The comparative lack of regulatory safeguards brings risks to crypto investing. However, you also need to be wary of hacks and scams. Also, weigh the probability of success or failure and regulatory concerns for specific cryptocurrencies. Let’s explore some of the biggest risks to consider before investing.

1) Crypto Scams and Hacks

According to the US Federal Trade Commission (FTC), consumers reported losing more than $1 billion to crypto scams during an 18-month period. However, it’s likely that a significant percentage of cryptocurrency scams are never reported. Crypto scams can range from phishing to obtain login credentials to celebrity endorsements of tokens that are ultimately headed to zero value. But even meme coin tokens themselves can contain malicious code that prevents buyers from selling the tokens, creating huge profits for token creators that are nearly impossible to find.

Tokens found on reputable exchanges won’t contain malicious code (but could still lose value). Instead, these largely represent vetted coins and tokens. Consider limiting the scope of your crypto journey until you’ve learned more about the ecosystem and its good and bad neighborhoods.

2) High Probability of Failure

Currently, CoinGecko, a leading crypto data aggregation platform, tracks nearly 15,000 cryptocurrencies. However, of the more than 24,000 cryptocurrencies tracked by the coin data site since 2014, more than half have failed. While the leading cryptocurrencies by market capitalization are generally well established, moving further down the list proves more speculative. The data suggests that most cryptocurrencies won’t survive.

awif chart

Meme coins, in particular, while profitable with well-timed buys and sells, ultimately have no value. Most will trend toward that value over time, if not immediately after launch.

3) Regulatory Uncertainty

In the US, several high-profile lawsuits against crypto projects and exchanges by the Securities and Exchange Commission (SEC) have created lingering doubts about specific types of cryptocurrencies. Although a court ruling in the well-publicized Ripple case found that XRP tokens sold on the secondary market are not securities, the uncertainty over XRP, a top-ten cryptocurrency by market cap, caused many exchanges to stop offering XRP.

2023 also saw two notable lawsuits against Coinbase and Binance, claiming that the exchanges both failed to register as an exchange, a broker, and a clearing agency as required (according to the SEC). At the heart of the suit is whether specific cryptocurrencies are securities or digital commodities and which agencies have regulatory jurisdiction over trading for these assets. The complaint identifies 13 cryptocurrencies as securities, including leading cryptos like Solana, Cardano, and Polygon, leading to price uncertainty for these coins as well as other coins with a similar presale history.

However, the SEC approval of Bitcoin ETFs and upcoming Ethereum ETFs signals the agency’s views on specific cryptocurrencies are more balanced.

4) Extreme Volatility

Bitcoin, considered to be one of the safest cryptocurrencies, fell from a high of $69,000 in 2021 to less than $16,000 in 2022. The world’s leading cryptocurrency went on to reach new all-time highs in 2024, but not without racking up massive losses for investors during the volatility between price peaks.

bitcoin all time chart

Bitcoin often leads investor sentiment for the broader market. However, cryptocurrencies with smaller market caps can see wider price swings. For example, Solana lost 90% of its value from its 2021 peak before bottoming in late 2022. By early 2024, Solana’s price nearly reached its all-time high again, giving long-term SOL investors a wild rollercoaster ride.

5) Losing Access to Your Wallet

Analysis from Chainalysis suggests that as much as 20% of all Bitcoin may be irretrievably lost. Earlier, we discussed the importance of backing up and safely storing crypto wallet keys. Once lost, wallet keys are impossible to recover, although some companies have had success hacking hardware wallets to recover lost keys. In the majority of cases, the digital assets remain on the blockchain, but no one can control the assets, so they remain dormant forever.

Is Bitcoin Safe?


Bitcoin is considered to be safer than most cryptocurrencies due to its worldwide market and robust mining community. The launch of Bitcoin ETFs is expected to reduce volatility and increase demand as BTC reaches a broader scope of investors. ETFs make it possible for investors to get Bitcoin exposure in their portfolios without the hassle of self-custody or the risks of using exchanges for custody.

The continuing demand for BTC suggests that Bitcoin, in particular, is unlikely to disappear any time soon. Bitcoin also enjoys a rare status amongst crypto assets. The project’s fair launch (with no presale or pre-mine) and worldwide, decentralized network make it clearly a digital commodity, simplifying regulatory concerns.

These factors don’t make Bitcoin a safe investment, however. Historically, Bitcoin has been much more volatile than traditional investments like index funds. From another perspective, the volatility that led to prior crashes has also seen Bitcoin reach new heights and create Bitcoin millionaires worldwide.

Are Stablecoins Safe?


As the name suggests, stablecoins are designed to hold a value. The most popular among these are USDC (US Dollar Coin) and USDT (Tether USD), both of which are pegged to the US dollar’s value and are backed by USD or dollar equivalents like treasury bills.

Generally, both of these tokens track the value of the US dollar with very little fluctuation. However, both have depegged from USD at times. In 2023, USDC briefly depegged following the collapse of Silicon Valley Bank. $33 billion in funds backing the coin were held with the failed bank.

Tether’s USDT also depegged from $1 on exchanges after Tether froze $434 million worth of USDT in 2023. The dip saw the value fall to $0.985 versus a $1 peg as investors sold the coin in response to Tether’s cooperation with the US DOJ, FBI, and Secret Service.

Fiat-backed stablecoins and asset-based stablecoins, such as DAI, have thus far fared better than algorithmic stablecoins. In 2022, UST crashed, sending crypto markets into turmoil. UST was launched as an algorithmic-based stablecoin using a complex but ultimately fragile minting and burning mechanism with a paired asset (LUNA). Today, UST trades at about $0.02.

Stablecoins can hold a fixed value in between trades and can be used to earn crypto passive income. However, be aware that value can fluctuate in response to outside events. USDC and USDT still lead the market with nearly $150 billion in combined market capitalization between these two leading tokens.

Are Crypto Exchanges Safe?


Crypto exchanges have a less-than-stellar reputation regarding safety, some of which is deserved. In 2021 and 2022, more than 90 crypto exchanges closed their virtual doors each year. In some cases, users weren’t able to retrieve some (or all) of their funds.

However, some exchanges enjoy a better reputation for safety than others. Coinbase and Kraken are both highly regarded within the trading community.

coinbase homepage

eToro, which is a broker rather than an exchange, also provides a comparatively safe trading platform, and eToro boasts some of the highest user ratings in the industry on Trustpilot (4.2 out of 5 stars). eToro also offers copy trading, letting you follow the moves of successful traders and a $100,000 demo trading account so you can learn to trade without risking real money. US customers registered on eToro can trade 3 crypto tokens – BTC, BCH, and ETH.

etoro homepage

Research the exchanges you’re considering carefully. Coinbase is publicly traded and subject to SEC reporting requirements, including quarterly earnings and SEC filings. Kraken, long known for its transparency, was among the first exchanges to provide proof of reserves, a third-party audited method of proving the exchange holds the crypto it says it has. Both platforms offer pass-through FDIC insurance for cash balances (US users only).

Regardless of which exchange you choose to buy cryptocurrency on, consider moving your crypto to a self-custody crypto wallet. This strategy removes any risk associated with insolvency or paused withdrawals. While exchanges offer a convenient way to buy and sell cryptocurrencies, most experienced traders prefer not to leave their crypto assets on the exchange between trades.

Conclusion – Is Crypto Safe in 2025?


Cryptocurrency can see volatile price action, but that volatility can lead to outsized gains in some cases. To invest safely, it’s important to diversify your cryptocurrency investments and build a solid knowledge of the assets before you invest.

Consider using a self-custody crypto wallet to reduce risks associated with exchange insolvencies or paused withdrawals. Also, choose your exchange carefully, researching the reputation and staying power of the exchange before you make a deposit. Lastly, beware of crypto scams. The anonymity of the crypto world invites bad actors, so be discerning and learn to recognize potential scams to avoid becoming a statistic.

All investments come with risks, including crypto. However, investing in crypto can be much safer with a proper understanding of the risks and a disciplined approach to your crypto portfolio.

FAQs

Is cryptocurrency regulated?

The crypto market is largely unregulated. However, several ongoing legal battles could lead to additional oversight for specific trading markets. Be aware that cryptocurrency is currently not protected by government programs such as FDIC or SIPC insurance.

Should I trust cryptocurrency?

Certain cryptocurrencies, like Bitcoin and Ethereum, have a proven history of utility, security, and decentralization. However, smaller projects bring more risk, and some may even be scams. Weigh each crypto investment independently.

Is it safe to invest in cryptocurrency?

Investing in cryptocurrency can be extremely risky. However, you can reduce your risk by educating yourself about the dangers, using a self-custody crypto wallet, and choosing reputable exchanges.

Can you easily cash out cryptocurrency?

Reputable cryptocurrency exchanges like Coinbase and Kraken make it easy to convert crypto to cash and then withdraw in your local currency. However, some exchanges don’t support cash deposits or withdrawals in certain areas of the world.

Is buying crypto worth the risk?

In a bull run, even well-established crypto assets can outperform traditional investments by a wide margin. You can mitigate your risk by diversifying your investments and educating yourself on the dangers and pitfalls to avoid. Often, risks are tied to crypto exchanges themselves. You can reduce this risk by using exchanges for occasional trading rather than storage and keeping your crypto in a self-custody wallet in between trades.

Can you recover funds from a crypto scam?

In most cases, funds stolen in a crypto scam are lost forever. The anonymous nature of blockchain technology and transactions make it nearly impossible to find the culprit. Additionally, crypto transactions are irreversible.

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