Is Cryptocurrency a Good Way To Save Money?

Is Cryptocurrency a Smart Way to Save Money?

The Appeal of Cryptocurrency as a Savings Option

Cryptocurrency has captured the imagination of investors worldwide, and for good reason. People have made life-changing profits by holding digital assets over time. Bitcoin, Ethereum, and even lesser-known altcoins have skyrocketed in value, turning early buyers into millionaires. The idea of storing wealth in crypto, untouched by inflation or government interference, is enticing.

But is it really the best way to save money?

For every success story, there’s an equal number of cautionary tales. The crypto market is unpredictable, and security risks are rampant. The recent Bybit hack, where hackers stole $1.5 billion in Ethereum, is a stark reminder that digital assets are not immune to risk.

The Risks: Bybit Losing $1.5 Billion In Cryptocurrency

Security breaches in the crypto industry are nothing new, but the scale of the Bybit hack has sparked concerns. The exchange, which holds over $20 billion in assets, assured users that their funds would be reimbursed, but the incident raises serious questions:

• Can exchanges truly guarantee the safety of your funds?
• What happens if an exchange cannot cover stolen assets?
• Are users taking on unnecessary risks by keeping their savings in crypto?

Even Bybit founder, Ben Zhao, stepped in to advise Bybit users on limiting further losses by halting transactions. This highlights an ongoing problem: no matter how big an exchange is, it’s still vulnerable. And when billions are at stake, a single breach can send people to the trenches.

Why Do People Store Money In Cryptocurrency?

One word - Volatility

Unlike traditional savings accounts that offer stability and modest interest rates, crypto is highly volatile. The value of Bitcoin, Ethereum, and other digital assets can swing dramatically within hours, making people millionaires in a day or putting them in debts overnight, it's a 50/50 affair.

Take Ethereum, for example. Before the Bybit hack, ETH was trading around $2,741.59. Within 24 hours, it had dropped to $2,653, a 3.66% decline. While some may see this as a buying opportunity, imagine if your savings lost nearly 4% of their value overnight.

If you need access to your funds in an emergency, there’s no guarantee that your holdings will be worth the same—or anything at all. Unlike traditional banks, which provide insurance on deposits, crypto savings are entirely exposed to market fluctuations.

Self-Custody vs. Exchanges: Are You Really in Control?

One argument in favor of crypto savings is that you can store your assets yourself, without relying on banks or third parties. But this comes with its own set of challenges:

• Keeping funds on exchanges: While convenient, it exposes users to hacks and potential losses, as seen with Bybit.
• Using self-custody wallets: A safer alternative, but if you lose your private keys, your funds are gone forever.

This raises a difficult question: is crypto truly a safer way to store money if you could lose it all due to human error or a cyberattack?

Regulatory Uncertainty and Its Impact on Crypto Savings

Governments worldwide are still figuring out how to regulate cryptocurrency. In some cases, regulations have been favorable. In others like Nigeria, they’ve led to asset freezes, restrictions, or even outright bans.

For example, several exchanges have faced legal trouble that temporarily blocked users from withdrawing their assets. If your savings are tied up in such a platform, you could be left unable to access your money when you need it most, that's why trading crypto in Nigeria happens discreetly.

Safer Alternatives for Storing and Growing Your Wealth

If you’re looking for ways to grow your wealth while minimizing risk, here are some alternatives to consider:

• Stablecoins (USDT, USDC): Pegged to fiat currencies, they reduce volatility but still come with counterparty risks.
• Traditional high-yield savings accounts: While interest rates are lower, they offer government-backed security.
• Stocks and bonds: A diversified portfolio can provide both growth and stability.
• Gold and real estate: Time-tested assets that hedge against inflation.

Cryptocurrency is an exciting and potentially profitable investment, but it’s far from the safest way to save money. The risks—from hacks and volatility to regulatory uncertainty—make it a questionable choice for long-term savings.

While crypto may have a place in your investment portfolio, treating it as a primary savings vehicle could expose you to significant financial risks. Instead, a balanced approach that includes both traditional and digital assets may be the best way to protect and grow your wealth.