The current rate of volatility in cryptocurrencies’ prices like Bitcoin’s has been a worry for a lot of investors for some time now. That and the continuous hacking attempts during exchanges where people trade digital currency by buying and selling.
A lot of people have raised concerns about this lack of security as the risk of owning this cryptocurrency increases. It even resulted in one Bitcoin exchange market to file for bankruptcy in South Korea and Youbit in the year 2017.
This uncertainty highlights the risks that Bitcoin investors face every day in their efforts to profit from it and other cryptocurrencies. The debate on Bitcoin being an actual currency or just a means of investment is ongoing as the IRS considers it property, the Financial Crime Enforcement Network states it as a currency and Securities and Exchange Commission recognize it as security.
One of the major issues in Bitcoin investment is that the criminals are difficult to catch as they are anonymous and the robberies are prolific. With the increase in the number of initial Bitcoin offerings, the incidents of a break-in hacks into the exchanges like personal wallets or CoinBase has also risen, according to cybersecurity experts.
Bitcoin money is very profitable for these criminals and in about every instance, a simple application flaw can be exploited by malware.
In an instance like this, attackers and hackers get easy access to the user information and then they illegally purchase more Bitcoins or cryptocurrency or maybe even use the card information that the user might have stored in their account. Hackers tend to go to target assets that will give them large financial gains.
As cryptocurrencies like Ethereum and Bitcoin gain popularity and more value, the platforms like Bitcoin Loophole that provide support to trading, buying and selling of these cryptocurrencies will be targeted increasingly.
The latest target for hackers and attackers now is cryptocurrency exchanges and similar exchanges. Cybersecurity experts reported having followed with ransomware, various ploys and phishing emails that hackers have knowns to use for many years.
Even though the technology used in creating cryptocurrencies is strong and hasn’t yet been compromised, investors and traders should be alert about the exchange websites they use for trading cryptocurrency.
These websites are as vulnerable to hacking and cyber attacks as any other website on the internet. Therefore, exchange websites must boost their cybersecurity techniques as Bitcoin and other cryptocurrency trading is sure to increase.
As this happens, the stakes of trading in cryptocurrency are potentially higher as its not just credit card information anymore that is protected and insured but also highly valuable cryptocurrencies which, if lost, users will have absolutely no refund for their losses.
To avoid that, read on for tips and bits of information which might prove of some help.
Evaluate How Many Risks You Can Tolerate
The first and foremost factor that you should calculate and figure out is how much money you want to invest. Cryptocurrency is a highly volatile investment. It is still a new trade market and large fluctuations occur each day.
This amount will differ for you depending on how much risk you can tolerate, your life cycle phase, your willingness and ability to take risks and your financial aims.
Do Your Research
Irrespective of your risk tolerance, awareness and knowledge of what you are doing and being educated on the industry that you are trading in are the most important factors to sort before you decide to start investing.
Start by reading a book on cryptocurrency or following news, updates, and advances on the internet relating to cryptocurrency trading. But avoid being trapped by marketers who only want to sell you a certain cryptocurrency.
It is also highly recommended that you share and store your Bitcoins in more than one digital wallet. It is adviced that you keep it in two kinds of wallets- a ‘hot’ or spending wallet and a ‘cold’ or storage wallet.
The purpose of a hot wallet being it will only be used for spending. Assume that it’s your walk around money like you use as cash. Meaning you are advised to store small or medium-sized quantities of Bitcoin in the hot wallet.
Generally, hot wallets are available to keep on your smartphone and allowed to use for daily spendings. And never ever share your wallet password with anyone, no matter how much you trust them.
Some Other Kinds of Wallets
- Desktop Wallet
A desktop wallet is more advantageous than an online wallet for a number of reasons. Online wallets can be easily accessed from any place in the world and they are more prone to potential hacking.
On the other hand, desktop wallets can only be accessed by your private computer along with only that machine storing personal security keys. Hence, exposure to your password or security key on the internet is reduced.
Nevertheless, desktop wallets are still vulnerable to hackings if your personal computer gets infected with viruses or malware that’s designed to find and expose your passwords and safety keys to steal your Bitcoins. To avoid that, make sure you use the best quality of anti-virus available in the market.
- Hardware Wallet
A hardware wallet is even more secure than a desktop wallet. These wallets can be parts of hardware that you can easily carry around with yourself like on a USB stick. The added advantage of a hardware wallet is that it allows users to complete anonymity for carrying out transactions.
As the hardware wallet doesn’t allow any personal information to be linked to itself, no data is lost or leaked. Hardware wallets are also highly resilient to malware and viruses and in case you lose your wallet, you can still recover your funds using a seed phrase.
- Paper Wallet
Keeping a paper wallet can also be a considerably safer way of storing your Bitcoin. However, it requires a little advanced understanding of the working of digital currencies. You can generate a paper wallet through the internet using any website that provides paper wallets or for greater security, generates one offline.
Paper wallets can be stored conveniently because they don’t require a lot of space and on top of that, they also provide absolute anonymity to the user. They are only a Bitcoin seed jotted down on a piece of paper.
- Physical Coins
Recently, services that allow Bitcoin and cryptocurrency investors to purchase physical coins are emerging. These coins contain a tamper-proof sticker that stores a determined amount of Bitcoin value.
To be able to purchase a physical coin, you will need to pay a little amount of premium over the amount of Bitcoin that you’re purchasing. This happens because the cost of shipment and manufacturing of the coins are slightly high in themselves.
Other points to keep in mind to ensure the safety of your Bitcoin are:
- To avoid reusing old passwords, use a password manager. Keeping old passwords can be a security threat.
- Never share your backup passwords (or recovery seeds) for Bitcoin wallets with anyone no matter how close you are.
- Never share the private key to your wallet with anyone.
- Avoid resuing Bitcoin addresses and passwords. Modern wallets do not allow this anymore.
- Don’t post your home address, email address or mobile number on social media.
- Always make sure you keep updating the anti-virus on your computer and your phone to avoid downloading malware or viruses.
- Always make sure you regularly back-up your wallet.
- Store your back up and cold storage wallet passwords and recovery seeds in a fireproof safe.
- Wherever you store your Bitcoin, make sure to use two-factor authentication.
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