How To Protect Your Cryptocurrency

Almost every day, there are cases of people who got rich investing in crypto. Sadly, there are just as many stories about people who lost it all. Maybe not because of investment decisions, but because they didn’t protect their money correctly.

You’d be surprised to know how often this happens:

a. You lose the crypto wallet recovery phrase, or you delete the 2FA code by mistake. Now you can’t access your funds anymore

b. You’ve been investing for months. Now that you want to withdraw, your platform/exchange is giving you an error. You can’t move money for months

c. You accidentally grant account access to a scammer (see phishing) who then empties your account

Maybe this isn’t you. Yet. Because these will eventually happen to those who don’t take control of their money. Without protection, all the amazing returns you get from crypto mean nothing.

And while the problems may be catastrophic, it’s ridiculously easy to prevent them from happening. All you need to know is:

  1. Where to keep your crypto (because exchanges are no longer safe)
  2. How to trade safely (because you can’t refund your money)
  3. Who to trust (because the wrong people will take everything)

And of course, never stop learning about the world of investing.

Where To Keep Cryptocurrency?

Where To Keep Cryptocurrency

While it’s easy to have cryptocurrency in an account, that doesn’t guarantee it will be safe.

You have three options:

  1. You can keep it in an exchange

Which is great if you want to access hundreds of coins and trade for almost no fees. The problem is, the money belongs to the exchange, not you anymore. The exchange can choose to suspend your account, to cancel withdrawals, and limit usability.

  1. You can stake it in a platform

Some altcoins have their own exchange platforms where you can stake their official coin. You essentially lock your balance for a few months and earn interest from it. That is if you’re able to withdraw later.

  1. You can keep it in a cold crypto wallet

While all exchanges have crypto wallets, cold wallets specialize in storage. You won’t see fair trading fees, but you can send and transfer your funds. You need no documentation, nothing except a phrase password and maybe a 2FA code.

Know, however, that a professional hacker can break into anything, let it be a wallet app, an offline wallet, or a Ledger Nano X device.

While some are safer than others, none of them is 100% secure. Here’s the strategy to protect your crypto, or at least minimize the losses.

Prioritize Hardware

If they really wanted to, hackers would already have your account. The thing is, they don’t know how much you hold, so it may not be worth it.

Even then, if your account is very secure, it’s too much work for an uncertain reward.

With centralized exchanges, it’s different, as these companies keep all the trader’s money in a few accounts.

For example, if someone broke into the official Coinbase wallets, the platform would be unable to pay you.

Rather than exchange wallets, use physical wallets:

  • A mobile wallet like Mycelium, which you can only access from your phone
  • A program like Exodus, which you can access only from your computer
  • A Trezor or Ledger wallet, an offline plug-in hardware device

In order for a hacker to access, they need to access your devices first. In the case of offline wallets, they’d need to steal the actual hardware in person.

If that happened, you could still lock it with one click from your mobile app.

Never Just One Wallet

Hot wallet, cold wallet. For a motivated hacker, it makes no difference. If they know you have money, they will find a way to get to it.

But what if you have dummy wallets? Or you split your money among many of them? It’s much harder to steal the entire amount.

Besides hacking, multi-accounts also protect your money from yourself. What if you forget the password or somehow lock yourself out of the account? In the worst case, you just lost one of your ten wallets (or 10% of your investments.

Now, a reason to avoid multiple wallets is the fees it costs to send money among them. In that case, it is acceptable to store money on exchanges. MANY exchanges, not one.

If an exchange fails or decides to suspend you, you can access the rest of your money while they solve the issue.

For maximum protection, use multiple hardware wallets.

Consider paper wallets

For someone who never heard about it, paper wallets sound like carrying cash or checks. For example, you could put this paper into a Bitcoin ATM to deposit on your virtual crypto wallet.

But unlike dollar bills, paper wallets are just information. It’s not money, but an access key to that money. If you can memorize or take a screenshot of the data, you can access the wallet.

This is what the paper wallet looks like:

You can use an ATM to get the fancy format for a fee. Or you can print your wallet key from your home. It doesn’t make a difference.

And you may think: “If I lose this paper on the street, someone could find it and access my wallet!”

Well, do you carry signed checks with you when going to the supermarket and do chores? Probably not. Like those documents, you keep them in a folder at home or some safe.

Also, you may have noticed the bill doesn’t specify what your wallet is. It could be on Binance’s exchange, or a Mycelium wallet, or a Trezor BTC address. Thieves would have no idea how to find your account.

And lastly, this paper wallet isn’t different from a direct deposit. Just because someone knows your bank number, it doesn’t mean they can enter your account. They can only send money there.

The point is, if you’re going to open crypto wallets, paper is the best way to store passwords. These days, expert hackers can get into any device.

Say you store passwords and screenshots on your phone. Someone will access your accounts if you lose your phone and they find it.

Have a dedicated device for crypto

It is safer to have a device you only use for crypto.

This doesn’t contradict the rule of having multiple wallets. Whatever those may be, this rule says that you should only access them from one device. Preferably, one you use for crypto exclusively.

It’s not hard to explain how unsafe it is to carry crypto on your phone. You may not care if it’s just $500, but if you hold over six figures, that’s risky.

Some thieves may patiently wait until you accumulate enough profits and then steal from you.

Instead, get a Ledger or Trezor device. If not, maybe you have an old spare phone/computer, which you could use for crypto only.

Assuming that’s the only usage, scammers can’t access it. They won’t even know it exists.

That makes it a safe place to store your passwords. Just keep your keys on paper too in case your device stops working or gets lost.

How To Trade Safely?

How To Trade Safely

Money is useless until you use it, and it couldn’t be more true with crypto. If you want to take those opportunities, you need an efficient way to buy-sell coins. If everyone stored Bitcoin in a cold wallet, the trading activity would decrease and it would affect the price.

Trading is okay when you can do it efficiently. The problem with exchanges is, they sacrifice security for convenience. So before you deposit a single dollar, here’s what you need to do:

Secure Your Withdrawal Method

It is so easy to get into crypto. Almost every platform has some sort of welcome gift to lure you in. And with some common sense, it’s not that complicated to grow your account.

So you wonder: If I’m making money, then why not deposit some of mine?

Stop right there. Or you may never see that money again.

It’s not that easy to get money out of the system. It could be harder than making profits. And it’s the fastest way to bust a make-money crypto scam.

Generally, you will need to:

  • Provide identity documents
  • Provide some proof of address (and maybe proof of income)
  • Possibly make a selfie holding your ID document

And as stupid as it is, it’s too easy to get it wrong. For example:

  • You cannot change your credentials after registration. So if your documents don’t match exactly, you can’t verify
  • The platform may be unable to make a bank transfer to your country
  • Exchanges may not accept certain types of credit cards (e.g., MasterCard on Binance)
  • If your exchange determines that you’re misusing their services, they can lock your funds
  • The withdrawal can fail for no apparent reason, so you create a support case ticket and wait. And wait!

It’s always something. It’s better to find out now than after you deposit thousands of dollars.

If a platform doesn’t let you withdraw but is good for trading, however, you should still use it. If you have another platform that does allow it, simply send the funds there later.

Ideally, have at least two withdrawal methods in case something goes wrong.

Test Before Sending Big Bucks

Simple yet so often ignored. You DON’T have a second chance to send the money. Unless…

You send a small amount first. Maybe you lose it because of an address blunder, or someone is trying to scam you.

But how?

Imagine you want to sell your bitcoin but don’t want to waste money on exchange fees. You find a guy who will buy it for cash. You meet him in a cafe and wait for the transaction to go through.

While you send the bitcoin to his address, he gives you the cash. Time passes, and the deposit doesn’t appear anywhere.

The person assumes you sent it to the wrong address. You ‘lost’ the bitcoin, and he demands the cashback. You’re in trouble.

But the guy has a hidden wallet, the one that received your bitcoin. He gets it for free.

Had you made a $10 test deposit, this wouldn’t have happened. Whether you trade with locals or online, it saves lots of regrets.

Protect Your Wallet When Trading Locally

It’s worth trading LocalBitcoins and similar. Despite the transaction fees, it’s easier to withdraw money this way.

If you trade in person, there are a few risks to be aware of:

  • Avoid threatening situations

It’s preferable to sit in a cafe with lots of exposure, rather than a local in a silent street. Also, those who pull the “lost bitcoin” scam come in groups of three or more. Avoid going alone, especially when you’re the one carrying the cash.

That doesn’t mean the trader is going to do anything. It’s just some basic security measures. When two strangers meet to exchange money, one never knows what to expect.

  • Keep your connection private

Since you need the Internet to transfer the money, you should come with mobile data. And if you use a laptop, you can share that connection with Bluetooth.

You don’t want to use public wifi when you’re going to log into your accounts. Who knows? Maybe the trader who’s ‘sending the money’ is actually monitoring you with a fraudulent wifi connection.

If this person finds out your passwords and you buy him crypto, he can send it back to his account later.

If you have no choice but public connections, at least have the 2FA code enabled.

Who Can You Trust?

Who Can You Trust

The first thought may be Nobody. Only my bank, exchange, or whoever manages the money.

But neither your bank nor your exchange cares about your money. They just hold it because it gets them paid. If they need to cut you off the platform, they will.

Share Your Account Security

Who do you know that would protect it as well as you do? Maybe it’s a family member or your partner.

Given the risks, it helps to have someone manage the account in case you can’t.

If you lose your keys or forget a password, the other person may have it written somewhere.

If you want to buy-sell but can’t do it right now, your partner could do it for you.

If both of you can access the account, you’ll notice twice as fast when someone tries to compromise it.

There’s an obvious risk in trusting a second person, which is why this step is optional.

Limit Your Social Media Exposure

For scammers, it’s all about risk and reward. If nobody knows what you hold, how much, nor where, they won’t bother you.

Imagine you go to a crypto group and text: “Hello, I’m holding 2 ETH on my Coinbase Plus account. What’s the best way to withdraw it?”

You’ll soon start getting private messages and fake Coinbase emails.

Instead, be as confidential as possible.

If you’re into crypto investing, chances are you follow some news channels on social media. That could give scammers some hints about your holdings too. Why not have a social account you use for crypto content exclusively? Don’t use your main one for everything.

Invest in Your Financial Education

Invest in Your Financial Education

While that was a lot of tips, that’s not enough to make your wallets 100% safe. Sorry, scammers are always looking for new ways to deceive people. The only way to beat these is to always be one step ahead.

As you learn more about the crypto space, you get a better understanding of what’s the real deal and what’s a scam. And the sooner you educate yourself, the more money you’ll make.

Don’t overestimate how much control you have. If a company holds your money, it’s not yours until you get it back. With a cold wallet, only you can access it.

While that doesn’t make it unhackable, nobody is going to bother breaching a cold wallet that may have nothing in it. Just don’t wait until you’re moving big money to protect yourself.

About The Author

Max Khalus is an inbound marketing copywriter and content strategist. He delivers professional content for productivity coaches, financial media outlets, and even crypto entrepreneurs. He is certified in Marketing and Publicity.

Max ranked as Top 10 Rated on iWriter, scripted productivity videos, and researched over 300+ financial guides for Bust a Thief. Besides business writing, he specialices in inbound copywriting, being the focus on productivity, psychology, and high performance.

Share it
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments