Above is a daily chart of Bitcoin. Yesterday, Bitfinex (Bitcoin's third largest exchange located in Hong Kong), was hacked for just under 120 thousand BTC (~$65 million dollars). This is the second time a major exchange has been hacked since Bitcoin's inception (Mount Gox being the first back in 2013). This certainly hurts investor confidence and discredits the digital currency as an investment. It also caused a large price drop of over 20% & a loss of over ~$1.5 billion in market cap for Bitcoin. Not good, but this seems like merely another bump in the road. My favorite analogy to this type of situation is as follows: When a US bank is robbed, does everyone panic & exchange/liquidate all of their US dollars?
The Bitfinex hack should raise security awareness for all Bitcoin investors. While it is necessary to use exchanges on occasion, I highly recommend doing so in small amounts & removing your money from the exchanges immediately once the transactions have settled. It is a must to secure your bitcoin on your own in cold storage or on a hardware wallet.
Hardware wallets allow you to store the private keys to your Bitcoin on a device immune from computer virus' that infect software wallets (what you would create on an exchange or keep on your computer/mobile device). The following three hardware wallets are the most common, with a few key differences to each.
- Trezor - This is the most common hardware wallet & most trusted by Bitcoin Enthusiasts. It retails for about $120 USD.
- Ledger - This is the cheapest hardware wallet that retails for just over $30 USD.
- KeepKey - This is my preferred hardware wallet due to its sleek design & added layer of security. It retails for around $100 USD.
The Bitfinex hack highlights the risk involved with keeping your coins or any currency on an exchange. I highly recommend anyone investing in Bitcoin to do their own research on one of the above products. It is a very small investment necessary to protect your digital fortune.
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