Even though many predict that cryptocurrency is going to keep growing in the future without any repercussions or consequences, many crypto-skeptics are worried about the mass influx of cash into cryptocurrencies.
This is not just because they worry about the uncertain future of crypto. But also because there are so many security risks of cryptocurrency. If you are new to cryptocurrency, you are probably not aware of all these risks.
Keep reading for some tips on crypto risk management that should keep you safe even when you invest bundles of cash into a new cryptocurrency.
1. Conduct Proper Research on the Exchange You Choose
Due to the immense popularity of crypto investing, there are dozens of new exchanges popping up all the time. This isn’t necessarily a bad thing, since competition between exchanges results in a better user experience and reduced costs for you as a consumer.
But it can also mean that unscrupulous people try to take advantage of all the newbies by setting up exchanges that are only there to steal information and/or coins. If you aren’t sure of which crypto exchange to use when first starting, stick with the ones that have been around for a long time, and that everyone else trusts.
No need to experiment and start working with a new unknown exchange especially when you are first getting into crypto investing. You can do all that once you are a seasoned veteran and know exactly what there is to know about investing in cryptocurrency.
2. Cold Wallet vs Hot Wallet
This is a big one when it comes to managing the risks of cryptocurrency investing. There are many different kinds of wallets out there and if you aren’t aware of your options, you will probably store all your crypto in the exchange that you use. But that’s a hot wallet, that is, it is connected to a network and the internet and that makes it vulnerable to hackers and spyware.
With a hardware wallet or a cold wallet, you would store your crypto on a USB device that isn’t connected to the internet and thus, it’s much safer than the other alternative. If you aren’t sure how to go about this, there are dozens of YouTube tutorials or other blog posts outlining the steps.
Don’t worry – it might seem complicated at first, but once you can do it once, you won’t feel intimidated by the process any longer. And you can rest assured that your cryptocurrencies are safe from any hacking attempts.
3. Use a Secure Device
If you travel quite a bit or use unsecured public wifi connections, then you will want to be careful logging into your crypto exchanges on these networks. It would be highly recommended that you purchase a VPN that gets activated on all the devices you use to log into your exchanges.
This will encrypt your data and make it impossible for any hackers to get access to your data. It will also give you that peace of mind when you are traveling that you aren’t leaving precious information behind on cookies or other such data on random computers or networks around the world.
4. Be Cautious When Investing Into New Cryptocurrencies
There are over 20,000 cryptocurrencies on the market right now. Cryptocurrencies are constantly dying off and new ones are being released into the world.
If you are only focused on Bitcoin, Ethereum, and the top-tier cryptocurrencies, then you won’t care about all this shifting of the tides. But most people, even when they are new to crypto like to dabble in the new cryptocurrencies, hoping to catch one that will make them millionaires overnight.
You will want to be careful when investing in new cryptocurrencies since some of them can be scams and attempts to steal all your hard-earned money. Any time you see any cryptocurrency that promises gains overnight or gives guarantees of any kind, then you must stay far away from them.
Also, make sure to do your due diligence before investing in any new cryptocurrency and try to put only a small percentage of your portfolio into such risky investments.
5. Use Good Passwords and 2FA
This is the basics of crypto risk management, but it’s also something most people forget to do or get lazy about. Always make sure to use strong passwords with both symbols and letters in them when setting up your exchange.
Also, use two-factor authentication (2FA), so that you add that additional layer of security to your login attempts. This will make it harder for any hackers to gain access to your exchange and steal your coins.
Don’t know what 2FA is? Well, with 2FA, you would use your phone number or download an app, like Authy or Google Authenticator, which you then would connect to your crypto account using a QR code.
Once connected, the 2FA app will generate a random code expiring every 60 seconds. This makes it highly secure since the hacker will need access to both your password and the Authenticator application to log in to your account. This is highly implausible.
6. Avoid Scams and Phishing Attempts
This is another way that hackers and unscrupulous folks can gain access to your crypto account. What happens during a phishing scam? In it, a malicious person will impersonate a credible organization or authority to trick the victim into giving up sensitive information.
If this happens to you with crypto investing, you might get emails that look like they are coming from your crypto exchange, asking you to verify certain information by clicking a link. You would click the link if you weren’t suspicious, and then you would log in as you would normally.
The problem is that the unscrupulous person has sent you to a fake website that records your login information and thus, they can gain access to your sensitive information and account login in that manner.
This is why you need to be extra careful when interacting with folks online. Always pause and check the authenticity of every email sender, any hyperlinked URLs, and any other information like that. It’s better to be extra fastidious about all this and see everything as containing a red flag than to be too trusting.
7. Lookout for Fake Sites and Apps
This is another one that requires you to be cautious, careful, and on the lookout when online. Many fake apps or sites mimic trusted crypto exchanges nowadays.
That’s why when you are downloading a mobile app, make sure it’s an authentic one. Check out any reviews it has, and its popularity on the App Store.
Make sure of this also when you are visiting websites, that they are legitimate, and not fake websites that are just waiting to steal your information. The problem is that a lot of these fake sites and apps look very much like the real thing, which is why extreme vigilance when spending time online is so crucial.
8. Consider Whitelisting Your IP Address
Whitelisting might be the last-ditch line of defense when it comes to crypto risk management. What is it exactly?
Well, it’s an exchange authentication method in which you would pre-approve certain wallets and cryptocurrency addresses as verified accounts. You would be able to send funds to them and all other outgoing transfers are blocked.
This is helpful because even if a hacker can gain access to your account, they wouldn’t be able to send funds to a wallet other than the ones that are whitelisted. And since their address wouldn’t be white-listed, there’s nothing they could do even if they were inside your wallet.
9. Don’t Get Complacent With Crypto Security
Do all the steps above seem a little bit too much to you? Think about this – hackers have stolen $3 billion in cryptocurrency this year alone.
This happens because people are either unaware of the risks in cryptocurrency investing, or they start enthusiastically about maintaining security, but get complacent, lazy, or apathetic over time.
It’s crucial not to let your guard down when it comes to cryptocurrency security. You never know when a hacker or phishing scam might be coming your way. You’ve worked hard to earn all this money to put towards your cryptocurrency investing, so you must take care not to lose it to unscrupulous forces.
Protect Yourself From Risks of Cryptocurrency and Other Digital Investing
Digital investing is here to stay. This is the wave of the future, and that’s why it’s crucial for you as a consumer to protect yourself from any risks of cryptocurrency and other kinds of digital investing.
FDAR has been created specifically for this purpose. We work towards informing and educating consumers about digital investing risks so they can participate in crypto investing with confidence. You can inquire about our programs here.