Measures to store and trade cryptocurrencies securely in 2021.

Cryptocurrencies are gaining popularity as financial instruments. In 2021, crypto’s overall market cap surpassed $1.8 trillion, with assets like Bitcoin and Ethereum crossing their all-time high (ATH) values. The activity of active addresses on the Bitcoin blockchain network is rising with growing users. The number of blockchain wallets has increased from 45 million in January 2020 to 68 million in February 2021.

Safely Trade Cryptocurrencies in 2021

All these statistics point towards a growing number of users using crypto as a financial trading instrument in 2021. But unlike other financial tools, digital assets work on significantly different fundamentals, and scams, hacks, and attacks have become increasingly common in the cryptocurrency industry. Therefore, it is necessary to access secure methods to trade in cryptocurrencies safely without falling prey to scams.

Here are some methods that traders should consider to ensure the security of their cryptocurrency assets while trading.

1. Secure your private key

A private key is a gateway to unlocking the digital currencies that you wish to spend or transfer. It is a 256-bit number that is encoded in hexadecimal using 0-9 and characters a-f. The private key of a coin is represented in the following manner:

7b1945g423fa9bgg73f2a23b4495627f2d7r151656ab2f515a4e1849f8e5g6vd

The key is encoded with a random number such that the likelihood of the same private key is next to zero. Your private keys hold access to cryptocurrencies like Bitcoin and Ethereum. However, if you lose your keys, you subsequently lose access to your crypto funds. Also, this means that if someone has access to your private keys, then they can also transfer your crypto funds into their wallet.

2. Safely store your seed phrases

Most cryptocurrency wallets today hold a multitude of private keys. You will receive a seed phrase to enable access if you lose access to your cryptocurrency wallet. It is a collection of human-readable words that can be used to generate those keys. A seed phrase is represented in the following manner:

there feed tree wish grow friend rude sample great fish look dare

A seed phrase is a backup for you to access your wallet in case you lose the hardware device or the computer which had your software wallet suddenly crashed.

3. Cryptocurrency wallets

Several types of cryptocurrency wallets are now available in the market to store your digital currencies. Each wallet differs in its functionality, accessibility, and features. For instance, hardware wallets are relatively more secure as they store your coins in an offline manner. On the other hand, software wallets or mobile wallets facilitate easy access to your digital assets but are comparatively less secure.

Here at Cryptohopper, we’ve discussed the pros and cons of different cryptocurrency wallets in previous articles. It is usually smart to store most of your digital assets in a hardware wallet and store the amount you wish to trade or access easily in a software wallet.

4. Work with reputable platforms

Before trading on different platforms, investors should carefully research the platform’s security and reputation. Prominent platforms ensure that your crypto funds are stored in an offline manner so hackers cannot access them. Furthermore, these platforms engage in practices such as multi-factor authentication and SSL/TLS encryption to ensure maximum security.

5. Avoid cryptocurrency scams

A trader needs to take precautionary measures to avoid falling for cryptocurrency scams, which have become common in the industry. Some of the common scams prevalent in crypto include phishing, Ponzi schemes, social media giveaway scams, and fake apps. These social engineering attacks can come from anywhere on a mobile device, including texts, social media, third-party messaging platforms, or email.

To avoid falling prey to such scams, do not share your private keys, seed phrases, or API. Use anti-phishing software, always contact a platform through its official channels, and avoid promises that sound like “get quick rich” schemes. For more information, check out our previous article on avoiding cryptocurrency scams.

6. Hacks

Digital attacks have become an increasingly common phenomenon in almost every digital industry. There are many types of hacks, such as malware, keyloggers, or ransomware. To avoid these hacks, some of the common practices that should be employed include:

  • Trading on secure devices - Avoid using public wifi while accessing your funds. Always install antivirus software on your device and keep it updated with the latest installations.
  • Store your recovery seed phrase offline - It is a good practice to store your recovery seed phrase offline on a paper or a recovery seed backup. Hackers cannot gain access to information that is not stored online.
  • Avoid opening unknown files - Avoid opening files from unknown senders or downloading software from third-party websites.

Bottom Line

Recent activity in the past few months has shown that the interest in trading and buying crypto is surging. However, as digital assets work on different fundamentals, there is a lack of knowledge on handling and securely storing assets. Deploying necessary measures and conducting research will help traders engage in practices that facilitate secure trading in digital currencies.