There is a lot to cover in this topic, so I’ll begin with some of the biggest tips one can do when getting started with cryptocurrency. This applies to both beginners and advanced people.
It should be noted that about 9 million dollars of cryptocurrency is stolen one way or another every day! Knowing this, and knowing you are buying cryptocurrency, you should take all the steps necessary to protect your holdings.
Cryptocurrency Security Tips:
Don’t store your cryptocurrency on exchanges
You can assure you’re taking the right actions to protect your cryptos, but you don’t know if your cryptocurrency exchange is doing the same. There have been some notable cases about large exchanges freezing or losing their users funds, due to technical errors or hacks. Think back to Mt Gox, where hundreds of thousands of bitcoin were stolen. Think about the last couple weeks, where Binance had a 40 million dollar hack. And think of the many others we have heard about over the last 18 months. Always withdrawal funds in your exchange to your wallet if you’re not planning to trade them there soon. The top exchanges can be considered trustworthy and will most likely keep your coins more secure than others do. Again though, even the top exchanges like Binance can and have been hacked, so “buyer” beware.
Enable two-factor authentication
Two-factor authentication includes an extra layer of security to the validation procedure by making it harder for attackers to invade your wallet or exchange account, since knowing the password alone isn’t enough to give access to them. Something like google authenticator is highly recommended and necessary if you are diving down the cryptocurrency rabbit hole. Most wallets and exchanges offer 2-factor authentication options, like requiring a random PIN sent to you by SMS or email.
Use difficult passwords
When creating a wallet or cryptocurrency exchange account, you always need to use an extremely secure password. Try to combine upper and lowercase letters, numbers and symbols whenever possible. If you want, there are also online password generators that you can use like for example Passwords Generator. After you created your password, make sure to store it on a safe place. The best place is to write it down on a piece of paper to store it offline, but you can also make use of your trusted password keeper.
Another cryptocurrency security tip that is related to this one is to add a password to your cryptocurrency portfolio tracker if possible. Some crypto portfolio trackers do offer this feature and you should make use of it if you want to avoid someone discovering your holdings if your phone is ever stolen.
Keep your device safe
Make sure you have an updated antivirus and firewall enabled. Don’t install any software you’re not entirely sure about the safety. Of course, never download any suspicious attachments and make sure to research about the reputation of a software you’re about to install, using Google, social media sites like Reddit or friends more knowledgeable about the topic.
Avoid public WiFi
Wifi hosts can direct your browser to any page, which can be, sometimes, a mimic version of your exchange or wallet. They can also collect data transmitted through the network which, in case, includes the password you typed. If you need to access your wallet from a public WiFi, use a VPN.
Buy a cryptocurrency hardware wallet
Cryptocurrency hardware wallets are by far the safest way to store your digital assets. A cryptocurrency hardware wallet is a specialized device that stores their user’s private keys inside of an impenetrable circuit and allows them to sign transactions with a single click. They also come with a “seed”, a physical paper that allows the users to transfer their keys to another wallet in case the device is lost or stolen. Some of the best hard wallets out there are Ledger, Trezor, and KeepKey. A simple google search can take you to their website. If you do buy one, buy it directly from them and not a 3rd party, as that too can be a danger. In this case, DYOR (do your own research) when choosing. I personally use a Ledger (this is not an endorsement).
Beware of phishing scams
A very common scam technique used by hackers is creating a fake, identical version of the exchange or web wallet page they use and mailing the link to the victim, usually with a convincing message that convinces them to log in and take some action instantly. This is called phishing. A lot of people access these sites (for example, they look very similar in address with maybe an 0 instead of a o), enter their data and the hackers take that data and do what they want. To avoid phishing, always check if the link showing in your browser perfectly matches the one of your exchange or web wallet.
Don’t get caught up in “pump and dumps”
A pump and dump is a tactic by which an influencer, or a group of people, generate hype in order to get a lot of people to buy a cryptocurrency at the same time. By getting all these people to buy a coin at the same time, its price rises astronomically in just minutes, enabling the organizers of the pump and dump to “dump” on all the people buying at a higher price. People following the hype and not the metrics behind why this is happening, leads to those other people being left in the dump and losing a lot of money. Again, DYOR on proper cryptos and do fall for the “fad” or “fomo”.
Lets dig into this further. This is a highly illegal practice in both traditional markets and also cryptocurrency markets, and you should stay away from it, not only for legal reasons, but also to keep your cryptocurrency safe. The organizers will try to lure you into participating by promising outlandish returns, however, the fact is that only the insiders and the organizers will be profiting from this endeavor. It is not uncommon that a coin plummets over 95%+ after the pump and dump is over (like in the case of many coins we have all heard of), hence why it’s such a crucial cryptocurrency security tip to just stay away from this.
Keep your holdings private
There have been numerous cases of people getting assaulted, or even murdered, by bad actors pretending to steal their cryptocurrency. One well known and famous sad example that occurred last year is the one of a Norwegian man that was brutally murdered after conducting a larger in-person Bitcoin transaction. Stealing cryptocurrency is especially attractive for criminals, over say a bank account, due to their anonymous nature. Money stolen from a bank account is usually tied to an identity and can be retrieved in some cases, on the other hand, Bitcoin and most other cryptocurrencies are un-censorable and hard to trace to an identity. It’s therefore crucial to never tell anyone how much cryptocurrency you hold. This is especially true when talking with strangers on blockchain conferences or cryptocurrency meetups. In other words, DO NOT TALK ABOUT IT to people who you don’t know or trust. Even then, it’s always wise to never discuss your true amount of holdings!
ICOS boomed into the main stream in 2017 and exploded in 2018. In Q3 2017 the general public investments of ICOs raised more than 1.3 Billion. In Q3 2018, ICOs raised more than 50 Billion. There were 1000’s of ICOs coming out, with many each day. Conducting due diligence on all of them would be extremely time consuming, even for a full time and seasoned analyst, yet alone a beginner/amateur investors. We all got “tips” each day, whether it be from a friend, facebook, telegram, or whatsapp. With this popularity, and the soaring 100% increases in prices, its no surprise that some ICOs have been used to fund scams and cheat investors of their money.
A good tip and question to first ask yourself is “Do we need blockchain or a native token for this project?”. If the answer is no to both, chances are that ICO project is an example of a scam.
If the project has a lack of detail on how the technology works, this is a huge red flag. If the website shows almost nothing, or if the “advisors” or minds behind it look suspicious (one can google each person), or if you know a person who is listed and when talking to them they say they have no part of this (I have actually had these conversations), clearly it’s a red flag and scam. Another good red flag is to understand the team behind it. If there is no real experience, that’s not a good sign. Additionally, if there are not any full time developers, again, heed extreme caution. Same can be said if there is no clear roadmap to said project. Avoid avoid avoid! Just like investing in any business, make sure you understand all these points and digest them. Make sure the project is solving a real problem, with a real team, and with a real roadmap. Just like investing in an early stage start up, DON’T go all in!
Remember, nothing can compete with quality due diligence!!
Now, it would be remiss at this point, not to mention the iTrust platform. We have taken all of the security issues into consideration and have taken measures to ensure that when people want to trade cryptos in their IRA, they are doing so by the safest means available.
To quickly review here are some of the benefits to buying/selling in cryptocurrency in an IRA:
- You are buying with tax-deferred dollars (Traditional IRA)
- This means you will be able to acquire more crypto
- As opposed to a brokerage account, you do not pay taxes on gains when trading. All assets, crypto, and cash remain in the IRA and remains tax-deferred.
- Your investment grows tax-deferred (Roth IRA grows tax-free)
- You will not have to pay any taxes on your investment gains until you take a distribution from your IRA during retirement years (over 59.5 years old)
- You can control when and how much to take at distribution giving you more control of your personal tax situation (if over 70.5 you have to take RMD, required minimum distribution)
- You can buy and sell at will without tracking for taxes
- As long as you leave the funds in your IRA, no taxable event will occur
- Funds that are traded outside of IRA are considered short term capital gains and are taxed as ordinary income (If positions are held less than a year)
- If a position is held for over a year than it is long term capital gains and taxed up to 20%
- You can liquidate, move into cash, and invest in other products or move to a different custodian. Again, all tax deferred with no penalties.
We have also partnered with Ledger Vault for the holding of the cryptocurrency. Ledger Vault is the institutional grade level storage of Ledger, one of the best wallets on the market. By partnering with Ledger Vault, we offer this institutional level storage to retail clients. This is a game changer and a first, in that people can trade and hold their holdings not only with the benefits of an IRA but knowing that the safety and security are top notch.
So you have now taken a plunge into tips and tricks into the security of cryptocurrency. We appreciate you learning, as that is one of the core objectives here at iTrust.
We will be releasing many more educational pieces, so please subscribe to our blogs, Medium, and YouTube channels. Remember, the more you learn, the more informed you will be about any and all decisions you make.If you have any questions please feel free to reach out to us at firstname.lastname@example.org or call us at (866) 30-Trust (866-308-7878)