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How to Avoid Losing Crypto on an Exchange

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Cryptocurrency exchanges are the lifeblood of the cryptocurrency world, providing a way for people to buy and sell tokens and coins. But they can also be a source of heartbreak and loss, as many people have discovered to their cost.

In this article, we look at how to avoid losing crypto on an exchange. Not all exchanges are created equal, and some are much more trustworthy than others, so be sure to do your research before using any platform.

FTX case

One of the reasons for FTX bankruptcy there was little liquidity due to poor management by the executive. After a recent report suggesting potential leverage and solvency issues, investors and traders began to panic, attempting to withdraw all their funds from the exchange at once. This massive exodus of funds depleted the stock market’s reserves and the lack of liquidity paralyzed its operations, eventually leading it to bankruptcy. This is why it is important to use exchanges with high levels of legitimate liquidity so that you can ensure that your funds are not subject to sudden mishaps like we saw with FTX.

In addition to FTX, FTX US, as well as other smaller FTX-affiliated corporations, filed for bankruptcy, citing the same reasons of illiquidity. This serves as a reminder to be extremely cautious when choosing the exchanges you trust your funds to – the old adage “if it sounds too good to be true, it probably is” rings especially true here.

Top 6 Security Tips to Keep Your Crypto Safe

So far, we have covered the importance of researching the exchange you want to use and the potential dangers associated with illiquidity. Now, here’s a handy list of the top six security tips to keep your crypto secure:

1. Keep your crypto in a personal wallet, not on an exchange

Exchanges are great for converting and trading different types of currencies, but the safest place to store your crypto is in a personal wallet. This way you own the coins, as the saying goes “not your keys, not your crypto”.

If the exchange is hacked, goes bankrupt, or the website goes down, you will retain access to your coins as the wallet will not be connected to the internet or the exchange in question. Additionally, most wallets include an additional layer of security, such as two-factor authentication.

Generally, wallets do not have geographic restrictions; however, there may be some differences depending on the type of wallet you use. For the hardware wallet, the prices may vary depending on the location, while for the web and software wallets, you may run into country restrictions mainly due to regulations. But if you want to use the The best crypto wallets in the UK. or American ones like Ledger, Exodus, or Trezor, you most likely have access to them.

2. Use a strong password and two-factor authentication for your personal wallet

This ensures that even if someone manages to guess your password, they won’t be able to get into the wallet without the added layer of security that two-factor authentication provides.

Two Factor Authentication (2FA) is the use of two different methods to authenticate the identity of the user. It usually involves the use of a password or PIN, as well as an additional factor such as a fingerprint scan, voice recognition, or text message sent to the user’s phone.

3. Don’t Store All Your Cryptocurrencies in One Place – Diversify Your Holdings

Even the most secure wallets can be subject to theft and hacking. Diversifying your holdings across multiple wallets will ensure that even if one wallet is compromised, the rest of your funds are still safe.

4. Know the risks associated with each type of cryptocurrency

Different types of currencies come with their own set of risks and it is important to understand the pros and cons of each before investing.

For example, the Ethereum network is much more susceptible to hacking than the Bitcoin network, due to its use of smart contracts that can be manipulated by bad actors.

5. Stay current on security threats and updates to your personal wallet and exchanges

Keep an eye out for any news related to the exchange you’re using and the wallet you’ve chosen – new technologies, bug fixes, or other solutions can help keep your funds safe from potential attackers. Also, make sure to always download the latest versions of the software associated with the exchange to ensure the highest levels of protection against malicious intent.

6. Be careful when sharing personal information online: use encryption where possible

Finally, the most important security tip is to ensure the privacy of your online identity. Be mindful of the data you share online and, if possible, always encrypt sensitive information before sending it.

Protect yourself from possible losses

Cryptocurrency is a great way to invest and trade with the added benefit of decentralization. However, unless proper precautions are taken to secure funds, one’s crypto investments may be at risk. To help protect yourself from possible loss due to negligence or malicious intent, be sure to keep these tips in mind!

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