You’ve seen the news. Between 2018 and 2020, Singaporeans lost around $29 million to crypto hacks. Gasp!
The crypto market is the Geylang of investments. It’s quirky, very risky and most importantly, it’s also an unregulated market. This means that when you fall victim to crypto fraud, the chances of you getting your money back are close to zero. None, no!
Which makes it all the more important that if you invest in cryptocurrencies, you do everything to protect your money stored in digital wallets. Prevention is better than cure, especially in the crypto market, where you would be hard pressed to find one.
Crypto scams can happen in several ways. Among them, phishing, Ponzi schemes and pump and dump are the most popular scam tactics. The tactics are constantly evolving, but you don’t need to understand everything or be a coding whiz to protect yourself against scams.
Here are some simple ways to prevent yourself from falling prey to scams. Remember, rule number one — Prevention is always better than cure!
Do not click on any suspicious links
It’s the crypto market’s equivalent of not taking candy from strangers. Always listen to your mother, children.
Phishing is an age-old method used by cybercriminals. These are bulk emails that contain an attachment or a hyperlink. When you click on the link or download the attachment, you immediately become vulnerable to phishing. All it really takes is one false click for the hackers to grab your confidential information. Poof! This is your opportunity to become a crypto millionaire.
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Before clicking anything, check the sender’s email address. All emails should be delivered from the official address of the platform. Any information you gather from the Information should also come from verified sources. For example, before responding to emails from Crypto.com, take a moment to read their guide on how you can defend yourself against phishing.
Spread your assets across multiple portfolios
In the same way as your ah my, nenek and patti hide their money in Milo boxes and cushion covers, you want to store your cryptocurrencies on multiple online and offline wallets. Above all, if you are investing large amounts, you do not want to put all your eggs in one basket.
With no limit on the number of portfolios you can create, it’s up to you how you want to diversify your assets. However, each wallet has its own fees. For beginners investing a few hundred dollars, considering the relatively small investment amount, the cost of multiple wallets may not make financial sense.
Crypto wallets can be classified into two categories: hot and cold.
Hot wallets are basically wallets that connect to the internet through an app on your phone, desktop, or directly to the web browser. MetaMask, Coinbase Wallet and Edge Wallet are some examples.
Because these wallets are connected to the Internet, they offer great convenience and accessibility. But it also means your wallet is at a higher risk of being hacked. At the very least, when a wallet is hacked, the rest of your assets are somewhere else. Think of it as cutting your losses.
So do you just cross your fingers and pray to God after diversifying your assets in the portfolios? Well no. This is where cold wallets come in.
Get a cold wallet
When you buy cryptocurrencies on cryptocurrency exchanges, your cryptoassets are stored by these third-party companies. Good for you if you have done your research and invested in a reputable cryptocurrency exchange.
However, the fact is that these exchanges, as reputable as they are, are not entirely foolproof. Since even trusted exchanges like Crypto.com have been hacked, you can never be too sure about the security of your cryptocurrencies unless you store them in a cold wallet.
What is a cold wallet? A cold wallet, also known as cold storage or hardware wallet, is a physical device that stores your cryptocurrency completely offline. This puts your assets completely safe from the risk of hacks that can occur online. To make transactions, you just need to connect them to your computer as you would a USB key or an external hard drive.
Cold wallets are your best bet for protecting your cryptocurrencies. Remember not to store your recovery password online. Not on your cell phones, not on computers. Paper is the way to go.
Also, if you are very careful, you can have an additional wallet for backup purposes in case your hardware wallet is damaged or lost. There is a catch, if you lose the physical device and/or the password (private key) without having a backup, be prepared to say goodbye to your crypto assets. These cold wallets do not come with a password reset feature.
Provide secure password protection
It may seem obvious, but many of us are guilty of using the same password on multiple accounts. It’s something you don’t want to do. Password protection is essential. Ideally, your password should be a complex mix of 16 characters of alphabets, numbers and special characters.
In addition to this, if applicable, configure your two-factor authentication (2FA). If the app you’re on doesn’t support 2FA, think again about using the exchange or wallet first.
READ ALSO: Iras, CNB, Singapore Poly latest organizations to warn against fake SMS, emails
Do your own research
My aspiring crypto millionaires — listen carefully. Although there is a lot to do to protect your crypto assets, you must first make sure that what you are buying is not a scam. No one can save you from a pump and dump scam if you don’t save yourself.
Again, as this is an unregulated market, the value of cryptocurrencies can be artificially inflated. Once the price has been “inflated”, the scammers “empty” their initial investment at a higher price. This will then cause a sudden sharp drop in the price of the cryptocurrency.
With many 18-year-old Tiktokers telling you which coin to buy next, you might be tempted to take @CryptoBaddie’s advice. She could be right or she could completely miss the mark.
It’s up to you to take the risk, but making informed choices would certainly save you from being trapped. Always do your own background checks on the people behind the project and get a reading of general public sentiment on platforms like Discord and Twitter before spending your hard-earned cash.
And finally, repeat after me: only invest what you can afford to lose.
Now, if your crypto account has already been hacked… what can you do?
I hate to break it to you, but there’s not much you can do but drown in your own tears. The crypto market is an unregulated market, so there is nothing the police can do. However, if you have invested your money in a large, reputable exchange, there is a chance that you will get your money back.
Earlier this year in January, 400 Crypto.com users were hacked. However, the exchange was quick to act by suspending withdrawals and resolving the issue. Fortunately, all affected accounts have also been refunded. This comes down to researching the exchanges you are investing with.
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This article was first published in MoneySmart.