What Risks You May Face when Trading and Storing Cryptocurrencies and How To Protect Yourself

Crypto may be one of the most secure ways of transacting, but, just like everything else, it comes with its own risks. First, there is the issue of price volatility, then there is the issue of cryptocurrencies being stolen from hacked exchanges and many more risks. To be a good investor and manage your online fortune appropriately, you need to be well-versed with the most common risks that come with dealing with cryptocurrencies and how you can protect yourself and your coins. Stay tuned to find out more.

What Risks You May Face when Trading and Storing Cryptocurrencies and How To Protect Yourself
What Risks You May Face when Trading and Storing Cryptocurrencies and How To Protect Yourself. Photo by dmitrydao on Unsplash

Table of contents

Risks that Come with Trading and Storing Cryptocurrencies
Negligence or Loss of Private Keys
Consumer Protection
Phishing and Malware
How to Protect Yourself
Confirm the Recipient’s Wallet Address Before Sending
Be Careful How you Store your Private Keys
Use a VPN
Final Words

Risks that Come with Trading and Storing Cryptocurrencies

As mentioned above, dealing with cryptocurrencies comes with several risks. Here are a few of them:

Negligence or Loss of Private Keys

Cryptocurrencies are kept in digital wallets controlled by the use of public and private keys. Simply put, the public key refers to your wallet address, while the private key is what controls your assets. In the event that the private key is destroyed or lost, an investor may lose access to their coins. And, if a hacker was to gain access to the private keys, they could steal your entire digital fortune.

Consumer Protection

The sad truth is that cryptocurrency doesn’t have any consumer protection. There is no reversing a transaction done on the blockchain. That means the only option you have after an erroneous transaction is to try your level best to persuade the recipient to return the funds voluntarily. This is because there isn’t any intermediary guarantor with a crypto transaction like it is with bank cards. While the idea of irreversibility alone may not have direct risks when it comes to investing in cryptocurrency, this risk may make one lose their fortune.

Phishing and Malware

Just like it is with ordinary money, cryptocurrency users can be duped into visiting a phishing site where they are asked to upload their crypto wallets and input a password, which might lead to their funds being stolen.

Some hackers disguise malware in undetectable websites, while others spread malware from one device to another through public networks. The idea is for the malware to steal your personal data and send it to the hacker who will then use it as they please.

Of course, users of traditional payment systems can also fall victim to phishing and malware, but, unlike traditional systems where you can cancel the transaction, cryptocurrency transfers cannot be reversed.

How to Protect Yourself

The above issues shouldn’t make you shy away from investing in cryptocurrencies. Here is how you can protect yourself.

Confirm the Recipient’s Wallet Address Before Sending

As already mentioned, cryptocurrency transactions are final and irreversible. That means if you send money to a wrong account, there is no way to get it back. So, double-check before you hit that “send’’ button. There is also this scam going round of someone asking you to send cryptocurrency to their account so that you can receive back more. Be vigilant and trust no one!

Be Careful How you Store your Private Keys

Anyone who has your private keys can access your wallet and possibly get away with your funds. You don’t want to keep your private keys on your computer where it can easily be found by hackers. Instead, you should write it down and store it somewhere safe. You can go further and split your private keys into several parts and keep it in separate places. You better be safe than sorry when it comes to safeguarding your private keys.

Use a VPN

While public Wi-Fis provides a convenient way to access the internet, cybercriminals take advantage of unsuspecting users to plan something more sinister using these networks. They use public networks to spread malware to several people, putting their data at risk. If you are a frequent user of public Wi-Fi, it is advisable to learn the functions of VPNs and download one to shield your data and activity from prying eyes.

Final Words

Bitcoin and other cryptocurrencies continue to grow in popularity as many people rush to have a share of this digital fortune. The problem is that investing and trading in cryptocurrency exposes users to several risks, most of which can leave you bankrupt and really frustrated. Knowing the risks you are exposed to as an investor and how you can protect yourself and your funds is an important step to becoming a well-informed and wise investor.

Tommy Droste Published by Tommy Droste

, Windows Insider MVP, MCITP EA and SA, studied Information System Engineering and is a keen follower of the Windows ecosystem. I have operates a computer software workshop.