Keeping your cryptocurrency safe — 12 ways to keep hackers, scammers and fraudsters at bay

Time-tested words of caution still hold true as a thumb rule, even if one is still learning how crypto markets work. If an offer sounds like it’s too good to be true, such as someone saying that they can give you ten times the returns of your investment, it usually is and would leave the investor poorer than before. Examples include ‘get rich quick’ schemes and self-anointed ‘bitcoin analysts’ who offer ‘tips’.

Keep your cash wallet closed until the basics of a coin or a lending business model make sense to you. Avoid the urgency of peer-pressure, and don’t be afraid of missing out. Experts say rushing in fear of missing out (FOMO) will derail an investor’s portfolio.

A survey in September 2021 found that celebrities influence the investment decisions of almost half the crypto investors in the US. Proving that such behaviour is detrimental to the investors’ interest, the celebrity-endorsed crypto token (EMAX) went on to lose over 90% of its value in less than a month since the endorsement!

Use strong passwords to login to websites on a clean smartphone or laptop and a secure network. This ensures that your data isn’t being ‘logged’ or leaked to the wrong people, at a time when India discussed powerful Pegasus malware in Parliament.

A clean computer is one that runs only the programs you intended to run and isn’t infected by viruses or otherwise security-impaired. You get bonus points for taking expert help to verify that your computing devices are clean and scan for viruses regularly. Purchasing a security suite may feel like a pinch on your pocket, but is an investment in the long run to keep thieves from slashing open your pocket altogether.

In addition, enabling two-factor authentication (2FA) can improve security by requiring an OTP sent to your phone/email anytime you login. You have seen this in action for your internet banking website, and any other website that allows using a Google/Facebook account for authorising a login. Similar 2FA functionality is available on crypto exchanges as well.

Keep your data private, take an extra second to observe your own actions when you go about your day. Predicting how an attacker could get your data is difficult, but the thumb-rule is to never supply more information than what is needed.

For example, don’t click unnecessary links in your email, don’t reveal your birthday to unverified callers on phone or websites, and don’t send a photo of your ID proofs to an unknown WhatsApp number. When on Facebook, avoid giving apps personal information that claim to ‘predict your future’ or to ‘describe your perfect life partner’.

Similarly, avoid clicking on random links from unverified sources who promise prizes, since they may try and steal your personal details. These details could then be sold onwards, used to send more spam or even help them hack into your user accounts.

Login to your crypto accounts and wallets regularly. Create a schedule and stick to it, even if you don’t plan on buying or selling anything. Not only does this help to keep an eye on what is going on, it also allows you to quickly identify and report suspicious/unexpected transactions.

Before making an investment, evaluate and research the prospective opportunity. If there aren’t too many investors and only a small pool of individuals stand to gain from it, it’s a potential red flag for a ‘pump and dump’ or a ‘pull the rug’ scheme in the making.

During the Sushiswap rug pull, the value of the token reached highs of $128 before dropping to less than $1. Esports organisation FaZe Clan suspended multiple members in July 2021, who had participated in a crypto pump-and-dump disguised as a charity drive while taking home tens of thousands of dollars. Moreover, fraudulent initial coin offerings (ICOs) — the launch of new coins — are a dime a dozen.

Most such schemes don’t operate with heavily traded cryptocurrencies like Bitcoin or Ethereum, but target less known coins instead. That allows them to make their money and get out before too many eyebrows are raised.

Fear of volatility has wiped out the fortunes of many. If prices rise up as the money flows in, it will go down when these investors step in to book their profits — and then go up again in another business cycle. If you have done your research, believe in a crypto asset and have a strategy for it, staying invested could avoid losses in the long term. Trying to capitalise on risky market movements, on the other hand, may not always bear fruit.

The price of Bitcoin, for instance, has dipped from being on the cusp of $50,000 at the beginning of September to barely hanging onto $40,000 after 30 days, after having been up and down the roller coaster a couple of times. However, its 200-day weekly moving average (WMA) has always kept on an upwards trajectory since being launched.

Diversify, even if you feel extremely confident about it. Experts advise splitting investment across different ‘asset classes’ such as stocks, property, gold, fixed deposits and now crypto. Even within the class of crypto, investing in more than one coin helps to spread out risk. This improves chances of turning a profit at any given time, even if the value of different coins moves in opposite directions.

However, crypto assets are classified as the riskiest of all, hence even the most enthusiastic backers of crypto assets say that you must invest only as much as you’re prepared to lose in a collapse.

The online exchange where you invest or trade in cryptocurrencies can make all the difference between retaining your portfolio or losing it to hackers. This holds good whether you are accumulating cryptocurrency as an investment, lending it to earn more, or buying non-fungible token (NFT) art pieces as a collector.

A reputable exchange usually pays more attention to factors like security, being able to handle sudden traffic, and ease of use. They’re also in a position to compensate you for your loss if things go wrong.

In the crypto world, digital currencies are stored in wallets of different types. There are two main types. The first are exchange-owned wallets which are just fine for beginners but could be compromised by hacking attacks. The second are private wallets, owned fully by a person. Individuals who accumulate a lot of cryptocurrency, usually transfer their possessions over to their own private ‘cold’ wallet to gain security and control.

All crypto wallets have two keys, a public one that others can use to send you digital currency, and a private, secret one that you can use to ‘login’ and pay others. The private key is for your use only, do not share with others and keep it safe with a backup. However, avoid keeping it somewhere obvious like an email or naming it a document called ‘crypto wallet key’, which will make it easy for a hacker to sniff it out, if any of your other wallets are compromised.

Always verify the recipient’s wallet when sending crypto directly to another person, this is called a P2P (peer to peer) transaction. To avoid becoming a hacker’s target, never reveal how much currency is in your crypto wallet.

There are more complex steps one can take for added security. However, with the 12 simple safety measures described above, your cryptocurrency is relatively safe and less of an attractive target to hackers.

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