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The safekeeping of cryptocurrency is a common concern among investors. Just as individuals hold cash in a bank, it’s important to secure cryptocurrency as best as possible.
Because of some unique features of cryptocurrency, including how it is traded across online platforms and its storage, investors should be mindful of the possible opportunities for theft, fraud and loss of assets. While there are challenges to protecting these digital assets, there are some best practices to help keep your digital currency safe.
Tips for Protecting your Digital Currency
1. Store Offline When Possible
Digital currency owners typically store their currency as a key with passwords in a digital wallet, often on a mobile device. Since these forms of storage are still technically online, there are inherent risks, which can be reduced by moving cryptocurrency offline. Referred to as “cold storage,” using an offline vault or wallet could reduce the potential risk of holding digital currency.
If you’re a digital currency investor looking to make a quick trade, according to an article on CoinTelegraph.com website holding your cryptocurrency in cold storage could make it a little more time consuming to access, but most digital currency owners would say it’s worth the security to do so because it eliminates some of the possible danger.
2. Use Two-Factor Authentication
To keep your digital currency secure, it’s recommended to utilize wallets and platforms that require at least two-factor authentication. In many cases, the first authorization would be entering a password like any other login, and then a second password sent to your smartphone, for example, would be the second mode of authentication.
Although they might not be as common, having a physical authentication, such as a finger print, or facial/vocal recognition, would be ideal for multi-factor authentication to help keep your digital currency safe. It would be difficult for someone to get ahold of your digital currencies by breaking through facial recognition software.
Not only should you be using multi-factor authentication for logging in, it can be useful for any transactions regarding your digital currencies.
3. Be Cautious on Mobile Devices
Since many two-factor authentications involve smart phones, whether it be sending an alert or code, cryptocurrency investors can contact their phone provider and set rules in place that could potentially prevent hackers from intercepting important information.
For example, a Bitcoinist.com article suggests you can instruct your cell phone carrier to never port your phone, further protecting your digital currency from bad actors. You can even set a rule that would prevent call forwarding to lower the risk of your phone number and information being stolen (or intercepted).
4. Encrypt Data
Encrypting your devices and wallets used for cryptocurrency can be a beneficial way of keeping your currencies safe and secure. There are various data encryption applications you can implement, depending on the type of device you use.
Backing up your digital assets is another way to reduce potential risk, and the backup drives should also be encrypted to keep your cryptocurrency as safe as you can.
5. Be Aware and Complete Due Diligence
While bad actors often attempt to execute phishing attacks, protect yourself from being one of the potential victims.
Use caution when you open emails, pay attention to website links and make sure you don’t enter personal information anywhere that could be insecure. Try to create strong passwords that are difficult to crack to keep your information safe, whether it regards your cryptocurrency wallet, credit card, email log in and phone information.
If someone can access a portion of your personal information they could be one step closer to hacking your cryptocurrency.
In addition to simply being aware of what you’re doing on the internet, it can be helpful to complete due diligence on the platforms and wallets you use to keep your digital assets safe.
Purchasing and trading cryptocurrency opens up possibilities for other users to access your currencies and personal information without your permission or knowledge. Using a digital currency platform that has extra security features and protective functions can prevent theft and give you peace-of-mind when dealing with your trades. Before you decide on a wallet or trading platform, research the credentials and security features thoroughly to potentially avoid any theft or issues.
How Equity Trust Strives to Protect your Digital Currency
To safeguard your digital currency in your IRA, Equity Trust’s Digital Asset Platform has six key features:
Multi-factor authentication and multi-signature wallets
Video: Investing in Cryptocurrency with Equity Trust’s Digital Asset Platform
Prior to making any investment decisions, please consult with the appropriate legal, tax, and/or investment professionals for advice. As a self-directed IRA custodian, ETC will not provide investment advice or risk assessment of any investment. The digital currency market may experience a high degree of volatility and clients should consult with an investment professional before any investment is made.
Equity Trust Company is a directed custodian and does not provide tax, legal or investment advice. Any information communicated by Equity Trust Company is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional. Equity Institutional services institutional clients of Equity Trust Company. Brokerage Services Available Through ETC Brokerage Services, Member SIPC, and FINRA. *Founded in 1974 | Self-Directed IRA Custodian since 1983. The predecessor business to Equity Trust Company was established in 1974 and the IRS approved as a custodian in 1983. **Assets under custody as of 3/1/2020.
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