How to Reduce Risk when Investing in Cryptocurrencies
Cryptocurrency can lose you a lot of money if you do not follow safe practices while investing. It’s important that you do research prior to investing to ensure that your assets are protected. Follow this list of safe practices before you buy!
1) Be Mindful Of Your Network
Before you ever log into a crypto exchange, online cryptocurrency storage wallet, or anything related to your investments, make sure that your network is secure. First step to use a VPN (Virtual Private Network). VPN’s encrypt your IP address and connect you to a VPN server and then to the internet, rather than directly to the internet. A VPN hides your online activity, making it more difficult for hackers to breach your data on the internet. Next, be mindful of your network. Do not use a public WiFi network to access anything related to your cryptocurrency portfolio because it could be accessible to online hackers. Only log in to exchanges and wallet when you are using your personal WifI network. Lastly, make all your passwords strong. Despite following steps to make sure your network is secure, you should make all your passwords for exchange and wallet logins unique and impossible to guess.
2) Utilize Multi-Factor Authentication For Access
Multi-Factor Authentications requires you to verify on multiple devices that you are truly the person logging into your account. You can use Google Authenticator, email authentication, text, or call authentication depending on what the login site has available. Multi-Factor protects you from hackers. If someone hacks your password to your exchange login which requires authentication by text messages, they will be unable to log in unless they have access to your phone too. Ensure the wallet and exchanges you are using provide this extra layer of security.
3) Use Only Safe Exchange
Prior to investing you should select an exchange that you’d like to purchase cryptocurrency through. Do your research on exchange before even making an account. A good rule of thumb is to look at the volume of transaction that an exchange has. If the amount is high, more people trust the exchange to process their transactions, protect their personal data, and assets. Many exchanges will require personal information such as your SSN, address, copy of passport, copy of license, bank account info, or credit card number. You want to ensure the exchange will protect all this private information. Even well-known exchanges have been subject to hacks and loss of funds like Cryptopia and Mt. Gox.
4) Store Assets In An Offline Wallet
It is vital that once you purchase cryptocurrencies on an exchange you transfer them to a wallet, preferably an offline hard wallet. Exchanges are subject to hacks. If your funds are kept on a hacked exchanged, you could lose everything. An offline physical wallet is only accessible by you. Hard wallet requires passcodes and private keys. Write down your access information to your hard wallet in multiple safe locations so that you can still access your assets if you lose one the sheets with your information. Another option is to utilize a software wallet or application. It is still not as safe as a hard wallet but safer than storage on an exchange. Before moving funds to a wallet, do your research and check that your wallet is fully functioning and from a reputable brand.
5) Don’t Put All Your Eggs In One Basket
Just as you likely wouldn’t invest all your money into a single cryptocurrency, you shouldn’t store all your funds on a single wallet. If your hard wallet is lost, all of your funds on the wallet are lost. Consider multiple storage locations for your assets. This a vital risk management practice in investing.
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