How to Keep Your Cryptocurrency Safe
Mistakes to avoid when dealing with your Cryptocurrency
If you own any cryptocurrency, you’ll need to adapt to a new way of keeping your money safe. You can’t just keep your Bitcoins under the bed or deposit your Ether in a bank (at least, not yet). So what are you supposed to do?
Mistake 1: Failing to Back Up Wallet Keys
Cryptocurrencies don’t come with online banking and password resets. Instead, you have a set of private keys that allow you to access the funds in your various wallets.
You are solely responsible for keeping your keys safe. If you lose your only copy perhaps because someone stole your laptop you will be locked out of your currency forever.
You should make physical copies of your private keys and store them somewhere safe from fire, water, and other damage.
Mistake 2: Not Using 2FA on Crypto Exchanges
Yes, we know, two-factor authentication is annoying. And if I’m being perfectly honest, I don’t use it myself on services like Facebook and Outlook. For me, it’s more hassle than its worth.
But crypto exchanges are another matter. Given their poor track record when it comes to hacks, you need to take every measure possible to keep your account secure, especially since real money is on the line.
Mistake 3: Blind Loyalty to One Crypto Exchange
The dubious history of insecurity in crypto exchanges means it’s prudent to spread your risk around multiple companies. There are lots of great crypto exchanges you can use, so why stick all of your eggs in one basket?
Not only is it sound advice from an investment standpoint but it also means you’ll have less exposure in case the exchange is hacked, becomes insolvent, or faces some other disaster.
Mistake 4: Not Verifying Your Exchange Identity
The Patriot Act of 2001 made it a legal requirement for all banks to undergo Know Your Customer verification and the laws also apply to crypto exchanges in the US. Even non-American exchanges now undertake the process in order to comply with US law for their American clients.
But here’s the catch: some crypto exchanges let you deposit funds and start trading without completing the verification process. They will not, however, allow you to withdraw money until you are verified. Obviously, the verification process also helps prevent fraud from happening on your account.
So, if you want to make sure your crypto assets are available when you need them, make sure you’ve completed the necessary verification steps on your exchanges of choice.
Mistake 5: Storing Cryptocurrency in Hot Wallets
Hot wallets are crypto wallets that are accessible over the internet and it’s that connectivity that opens them up to considerable risk. We’ve already mentioned exchange hacks, but you’re also at the whim of forced government shutdowns and some of the other pressing issues facing blockchain technology.
Instead, you should keep as little money in hot wallets as possible. Obviously, if you’re going to day trade or swing trade crypto, you’ll need some amount of liquidity. But generally speaking, crypto should be stored in cold wallets for maximum security. We’ve recommended some secure cold wallets to check out if you’re not sure where to start.
Mistake 6: Sending Crypto to the Wrong Wallet
It’s easy to suffer from wallet overload. You have public keys for your exchanges, for your offline storage, and for all the different coins you own. With so much going on, it’s easy to accidentally send coins to the wrong wallet.
If the crypto you send is not compatible with the wallet you’re sending it to, there’s a strong possibility that you’ll irrevocably lose your assets.
