Many of you perhaps have heard about cryptocurrency. Its popularity is rising, and many are becoming more interested to know and learn about it. But before you start investing, it is vital to know everything about it, including how safe is cryptocurrency trading. Knowing the risks will help you prepare and protect your investments in the future.
When it comes to investments, there will always be risks. The lack of discipline and management are some of the factors that can make or break your investments, but those are not the kind of risks we will talk about. In this article, we will be discussing more on the technical aspect and learn the kind of risks you will have to deal with.
One of the risks that cryptocurrency investors can face is cyber risks. It is essential to understand which of the cryptocurrencies’ elements are targets for hackers. To know how safe is cryptocurrency trading, it is equally important to know its risks.
1. Miners and Malware
Mining is the processing of the transaction and receiving payment in the form of tokens. In some cases, mining is not legal, and in this case, malware can use up to 65% go the CPU or video card power on the victim’s computer. Adylkuzz malware, which used EternalBlue, became active and succeeded in turning hundreds of thousands of computers into slave miners. PC owners whose computers got infected paid for the processing power necessary to perform blockchain transactions, while this behind the attack earned money from mining.
2. Attack On Crypto Exchanges
Crypto exchange platforms are websites where one can buy, sell, or exchange crypto money. Security measures are being followed. However, criminals can and are finding vulnerabilities. Criminals in July 2017 stole Bitcoin from Bithumb in South Korea, the world’s fourth largest exchange. The hackers stole the personal data of 31,000 users of the said crypto exchange and used them to attack using social engineering. Then, the hackers called the user database and reported the users’ wallet data before stealing their Bitcoins from their accounts. Cybercriminals can also manipulate the value of crypto on the exchange by conducting denial of service attacks.
3. Wallet Security
A crypto wallet is a software application that contains the user’s public and secret encryption keys vital for crypto trading, to make transactions, and to track tokens stored in a blockchain. This type of wallet is secured; however, it can be compromised if cybercriminals steal login data using malicious apps, spyware, phishing, and other standard attack methods.
To know how safe is cryptocurrency trading, it is essential to know the risks to address and avoid them as much as possible. Scams also happen in crypto trading, and here are some of the most common:
1. Initial Coin Offerings (ICOs)
ICO or initial coin offering is equivalent to IPO or initial public offering. A company launches an ICO to raise funds to create a new coin, app, or service. Many ICOs are legitimate; however, most of them have no real business or technology behind them. Also, their altcoins often make unsubstantiated claims regarding their products.
2. ICO Fraud
There are many regulating agencies, and some governments and law enforcement have started cracking down on ICO fraud. In fact, the Securities and Exchange Commission (SEC) in the US filed charges against ICOs sold based on fraudulent claims. In China, the selling of ICOs has been banned.
3. Unregulated Brokers and Exchanges
Brokers and exchanges are vital platforms in cryptocurrency trading. However, dozens or maybe hundreds of unregulated online exchanges and brokerage firms offer cryptocurrencies and crypto trading products. These firms will mostly charge their clients outrageous commissions or make withdrawing funds difficult after they have deposited their money. In works case scenarios, the offenders will steal the money and disappear. This is why traders are always advised to be wary in choosing their exchange platforms and be cautious about those too-good-to-be-true promotions and quick-riches promises.
4. Bitcoin Trading Systems
The volatility of Bitcoins spawned an industry of automated trading systems. Promoters of these products will make promises to traders to beat the market by arbitraging different exchanges’ prices. Typically, Bitcoin exchanges charge expensive fees for withdrawal and for converting crypto money into fiat currencies. This process also can take hours. This can lead to eliminating profits from bitcoin arbitrage and can lead to losses.
Tips To Safe Cryptocurrency Trading
Is trading cryptocurrency safe? Well, there is no way to get a zero-risk of trading. But, there are ways to mitigate some of the risks by following some simple rules. Knowing how safe is cryptocurrency trading is as good as knowing its risks and find and learn ways to mitigate them.
1.Trade What You Can Afford To Lose
It is essential to keep in mind that cryptocurrencies are volatile, perhaps more volatile than stocks and bonds. Know that there is a high chance that a popular altcoin today will no longer exist in the next month or year. This is why traders need to know and understand that there is a possibility of losing all of their deposits and can happen overnight.
2. Do Your Research
Reading reviews regarding brokers and exchanges are vital for traders before they open their accounts. Doing this can help them find reliable and current information, which is vital in trading. Participating in forums such as CryptoCompare and BitcoinTalk can also be very helpful to get information and advice.
3. Be Aware of Your Devices’ Security
Most of the trading and deals are done online in the cryptocurrency world. This is why installing reliable antivirus software on all the devices you are using for this purpose is a must to protect yourself and your investments against threats. Also, do not share your login details with anyone. The security and safety of your crypto money start from you. Find out more about cryptocurrency trading here!
Wanting to know how safe is cryptocurrency trading and if cryptocurrency is reliable are just two of the many questions you will be asking, especially when you are thinking of putting your money and investing in it. As you may have learned, there is no way to avoid the risks as investing is already a risk itself. But do remember that there are ways and means to protect and keep your cryptocurrencies safe. The security of your investment is your responsibility.