Ten years after the first Bitcoinmarket, the cryptocurrency market still resembles the Wild West. Some people can make hundreds of percent profit with a single lucky decision, while others lose everything in a few days. How do you protect your initial capital from rate fluctuations and your profit from fraud?
How to choose cryptocurrency and reduce risks
First of all, you need to decide on the cryptocurrency on which you want to earn. There is no universal rule here, almost any token’s exchange rate is capable of going up sharply and then collapsing just as sharply. A novice crypto investor can predict these movements only with a lot of luck. But it is possible to do something to protect your investments.
At first, it is better to choose a currency that has been around for a long time and is in demand among traders – like Bitcoin or Ethereum. They do not usually rise in value as fast as altcoins – little-known cryptocurrencies, but they are easier to find a buyer for if you need to sell tokens in a hurry. You can see a list of the most popular currencies and the dynamics of their rates, for example, here – the higher the market capitalization of the project, the lower the risk.
If you are an aggressive investor, confident in your abilities and ready to risk your free money, pay attention to promising altcoins. They’re cheaper and offer a faster return, but they also have drawbacks, like a low demand among traders, which can make them hard to convert into real money when you need them. And don’t put all your eggs in one basket – buy tokens in multiple currencies so you don’t take too many risks.
Check the details
When choosing a cryptocurrency and exchange, don’t get carried away by the fantastically generous offers. Crypto is, of course, a special world, but there’s no such thing as free cheese. If they promise super profits, look for the catch.
Here we can recall the cautionary tale of the Chinese service PlusToken, which promised investors a monthly income of 10 to 30%. More than 3 million people (far from just China) invested in such a tempting thing, and during its heyday in the spring of 2019, PlusToken was worth $17 billion.
Early investors did get the promised interest, but the rest were less fortunate. The “revolutionary platform” turned out to be a trivial financial pyramid scheme. The Chinese authorities arrested some of the organizers, but most of the money eventually dissolved.
Of course, most fraudulent pyramid schemes are not as vast as PlusToken, but their creators are very creative. For example, XtraderFX service, recently closed in Great Britain, advertised its services with fakes on behalf of TV stars and well-known financial experts.
Characteristic signs of dubious crypto projects:
- The people identified in the project team have not previously been seen in the news of the crypto world. In some cases, you can even find faces of famous actors with completely different
- names in the project team – this, however, is a very outstanding precedent.
- The creators of the cryptocurrency promise a guaranteed profit. Most likely, it is a pyramid scheme.
- The repository with the project code on GitHub is almost never updated. This means that either the project as such does not exist at all, or no one is working on it.
If any of this applies to the cryptocurrency you were considering for investment, you better choose another, more reliable target.
What is a cryptocurrency wallet and how to store tokens
Cryptocurrency wallets are used to store tokens. In a past post, we already talked about how they work and how to choose the safest one.
In a nutshell, hot and warm wallets are software wallets. They require an Internet connection and allow you to quickly use funds to trade, but it’s because they’re connected to the Web that they’re more vulnerable to hacking. To increase their security, be sure to enable two-factor authentication. Then it will be harder for criminals to get into the vault without your knowledge, as happened to one investor who lost more than $70,000 to a hacked wallet. And it’s better if this two-factor authentication is not via SMS, but, say, through an app: this will eliminate the risk of cloning your SIM card.
The more secure cold wallets are a separate device. Usually they look like a flash drive or a keychain, and cost the most popular models from $50 to $200.
Transaction exchanges provide users with hot wallets, but don’t keep all of your funds on them – trading platforms are constantly under the crosshairs of cyber gangs. It is wise to keep on your balance only the amount you plan to work with in the near future, and it is safest to send the rest of your assets to a cold wallet.
How cryptocurrency is stolen without hacking
Sometimes attackers don’t even need direct access to a victim’s wallet to steal their money – all they need is to mess with the owner’s head, and he’ll give it all up himself.
For example, relatively recently, scammers compromised the Twitter accounts of Elon Musk, Bill Gates, Kanye West and several other celebrities, and then posted promises on their behalf to double the amount of coins sent by users. In just a few hours, the scammers enriched themselves by more than $100,000.
Even if you are sure you would never fall for such a trick, be vigilant – the fraudsters regularly come up with new deception schemes. If someone offers you money for no reason, think about the motives of such generosity. And if it came to asking you to pay some amount in advance, you are probably being lured into a trap.
And it is in the crypto sphere, many of whose projects are adventurous by nature, that scammers are most active, counting that a user accustomed to the non-standard behavior of the crypto world as a whole will buy their assurances.
How to protect yourself when trading cryptocurrency
It is very important that all your crypto transactions go through a secure communication channel. If you access an exchange site over public Wi-Fi, criminals can intercept transaction information or spoof the website to steal your assets.
It’s safer to trade through your home network, because it’s more difficult to hack than a public network, as long as you password-protect it. Of course, not the default one on the router, but your own password, which is strong enough. The factory password is often the same on all routers of the same model, making your Wi-Fi vulnerable to brute-force attacks.
In any case, it’s a very wise practice to run all your crypto trading only through an encrypted VPN channel, creating an extra layer of security.
When choosing a VPN service, pay attention to the connection speed (it depends on the number and quality of the service provider’s pool of servers) and the availability of a kill switch feature. The latter is especially important for high-risk operations: if the secured communication channel goes down for some reason, your device is automatically disconnected from the Internet, i.e. unencrypted data will not go anywhere.
For crypto-investors, we recommend our product Kaspersky Secure Connection, which is well optimized for such tasks.
And, of course, it wouldn’t be a bad idea to install a reliable security solution on your computer or smartphone. There is a lot of money in the crypto world, which naturally attracts intruders. So, the probability of encountering a specialized infection that is designed to steal cryptocurrency keys is quite high.
- Study the market before you enter the exchange, and don’t get carried away with risky operations at the start.
- Diversify risks – invest in several cryptocurrencies to hedge against sudden drops in price.
- Carefully study each altcoin you decide to invest in to avoid pyramid schemes.
- Keep the bulk of your cryptocurrency capital in an offline wallet and keep its password in a safe place.
- Don’t buy into promises of free cheese, even from celebrities: their accounts may have been hacked, and it’s almost certainly a scam.
Protect your Internet connection and use antivirus.