The growing crypto market is enjoying constant waves of popularity. And anyone would agree when they find out that the global crypto market was valued at $1.69 billion in 2021. It is crystal clear: despite its volatility, the crypto market is growing. However, volatility should not be left behind. Investors have to follow it carefully so that their investments do not go to waste.
Furthermore, volatility is not the only risk the crypto industry implies. Many other risks can affect crypto investors worldwide, and it is essential that every crypto enthusiast is aware of them and know what to do in order to protect their digital assets.
So, what’s the best way to ensure you get the most out of your cryptocurrency investment? Apart from protecting your funds by using a crypto wallet, you also have to make sure your wallet is properly secured. The tips in this article are some of the best practices you should follow.
5 Cryptocurrency Security Risks to Prepare for in 2023
Though digital currencies are said to be a secure and fast way to transfer funds, there are associated risks to keep in mind. Crypto saw an increase in fraudulent activities from hackers during the pandemic, and cryptocurrency users fell victim on quite a few occasions.
The risk continues to grow as the world seems to be heading towards a recession, with hackers posing as legitimate sources of information or investment advice.
Losing some or all of your funds is a real threat, and the danger is that there is no way to recoup that loss. The following are some key risks you must prepare for if you’re a cryptocurrency investor.
1. Hacked Trading Platforms
If a hacker breaks through a trading platform’s security, the users risk losing their money. In 2018, Coincheck suffered a devastating loss after a successful hacking attempt on its platform, with $532 million worth of coins stolen. Once hackers infiltrate the platform, they can access users’ keys to withdraw funds and conduct fraudulent trades, leading to colossal losses.
That’s the main reason why you shouldn’t keep large amounts of crypto on an exchange and deposit your assets in a cold storage wallet.
2. Malware to Trick Users
Hackers create new and innovative ways to disguise malware and trick unsuspecting users. One such malware is called a fake tool that advertises on cryptocurrency websites. This is why it is always best to double-check before clicking on links/ads when visiting a specific website — even when it is reputable. Do not download any tool until you are sure it is legitimate.
3. Phishing Attempts that Clone Legitimate Websites
One of the ways phishing can steal your credentials is by posing as a genuine trading platform and asking investors to input their login information. Hackers send phishing emails to crypto users containing links that take them to the cloned website. Again, it’s always good to double-check links before clicking on them and scrutinize URLs to make sure they are spelled correctly before divulging any information.
4. Compromised Registration Forms
Registration forms on trading platforms are ripe opportunities for hackers to steal information they can sell on the dark web. It’s hard to detect a hacking attempt in a case like this, and that’s what makes it so dangerous.
5. Social Media Scams
Cryptocurrency criminals created a social media scam where they hijack the accounts of famous people and post messages about a “special giveaway.” The giveaway implied sending crypto to a specific address, and in return, users would get a doubled or even tripled amount. Many crypto investors were victims of this type of scams, believing they were coming from a wealthy and well-known source.
How to Protect Your Crypto Wallet
Some hackers and thieves scour the internet for investors’ personal information, such as phone numbers and email addresses, then use those to convince service providers to transfer the phone number to another device. Once the number is switched to a device they control, they can access the victim’s cryptocurrency account by resetting the password and ultimately stealing their funds.
Though there’s an inherent risk of losing your money to hackers, you can follow some steps to help keep your crypto wallet safe. There is no perfect solution, but these seven tips and tricks can guide new cryptocurrency investors.
1. Download and Use a VPN for Login
Consider downloading a VPN app, especially when you are away from home and need to use public WIFI to access your crypto wallet. A public WIFI does not have robust security features and is an easy target for hackers to collect personal information from individuals who connect to the network. A VPN disguises your real IP address and, as a result, blocks hackers from accessing your location.
2. Use Two-Factor Authorization
Two-factor authorization (2FA) is an excellent way to protect your crypto wallet. It comes with an additional security level. To gain access to your wallet, you can use the 2FA feature by downloading an app like Google Authenticator.
Furthermore, you also have the option of receiving notifications via text or email with a verification code whenever you are logging in.
3. Encrypt Your Wallet
Set up your crypto wallet so that it requires a password to withdraw funds. The password should be unique, containing a combination of letters, numbers, and punctuation marks, making it harder for hackers to figure out.
It is highly recommended that you do not use your social media site password for your crypto wallet. It might be hard to remember complicated passwords, and if that’s the case, keep a hard copy in a safe place.
4. Use Cold Storage
Hardware wallets, also called “cold storage,” allow you to store your digital assets offline. A hardware wallet could be a USB or a hard drive, and the main advantage is that when your assets are stored offline, hackers are unable to get into your account. A good practice is to ensure you encrypt your hardware wallet and perform regular backups.
5. Split up Your Funds
Can you imagine losing all your funds because you kept them in one place? Terrible!
A guiding principle is never to keep your eggs in one basket; in that way, if you lose a basket, it doesn’t mean you lose all your eggs. The same goes for your cryptocurrencies — separate and store them on multiple wallets to minimize the impact of any loss. In general, it is probably a good idea to only have a small amount online for trading purposes, while keeping the bulk of your savings in cold storage.
6. Keep Software up to Date
Always use the latest version of your wallet software so that security issues are immediately fixed when detected. All other software updates on your phone or the computer where you keep your crypto wallet should also be updated regularly, especially antivirus.
7. Download a Wallet from a Renowned Provider
Do your due diligence before selecting a crypto wallet because there are quite a few fake wallets and apps on the market. You should always double-check before installing—even if you’re using popular stores like App Store or Google Play. Read reviews and conduct comprehensive research on the provider to help you make the best-informed decision.
In some way, cryptocurrency is a secure virtual payment method, but it also operates in a volatile market, and there are significant threats associated with storing and trading digital assets. The devastating result of any of these risks is the loss of assets you may never recover.
What can you do to mitigate those risks and keep your funds safe? Be proactive. Cybersecurity is a personal responsibility, and the more you learn about the necessary security steps, the more equipped you will be to stave off malicious attempts from hackers.