If the rise of Robinhood is any indicator, Millennials are getting into investing in a big way. Part of the increase was time at home during the pandemic, but a huge part of it is easy access to real-time investing apps that can be accessed through a smartphone. In fact, 76% of young investors have reported logging onto a mobile investing platform at least once a week. It’s important to remember though, that with trading the markets, not all platforms are created equal. And the desire to trade cryptocurrencies has made trading securely a much bigger issue.
First let me explain a little bit about cryptocurrencies. Generally cryptocurrencies are traded on cryptocurrency exchanges, which are digital markets that allow their customers to trade the cryptocurrencies for other assets, fiat currencies or other cryptocurrencies through a trading platform. Exchanges are companies that profit from the trading activity of the customers earning through commissions on trading transactions.
Sounds streamlined and central, right? The downside is that while having the technology to trade cryptocurrencies gives more people than ever the opportunity to trade, digital accounts are easier to hack. If you’re interested in getting into trading cryptocurrencies, you’ll have to be aware of all the risks involved.
Many Cryptocurrency Exchanges are Registered in Tax Havens
It is common practice for these companies to have their registered office in tax havens, or locations where tax is levied at a low rate. This factor, together with the scarce regulation of the cryptocurrency industry contributes to the greater regulatory freedom. Unlike traditional futures exchanges, like CME or Eurex, there are no institutions aimed to protect investors in cryptocurrency exchanges. This lack of legal and regulatory protection puts investors in an inferior position. For this reason, it is extremely important to select the exchange you plan to use very carefully.
In order to allow for safe and reliable exchanges, you will need to adopt a selective criteria based on reputation and history. You’ll want to choose exchanges that have been active for several years, and that have established themselves on the market.
Exchanges Based in the USA May Offer a Higher Level of Protection
Among the exchanges that are based in the USA, there is an element that offers a greater protection to investors. For example, Coinbase Pro recently listed in the US stock market regularly performs IT security checks and financial audits. Krakin, an exchange that boasts “industry-leading security” is another option. Kraken encrypts sensitive account information at the data and system levels where it is strictly controlled and monitored.
In addition, if you trade on either of these exchanges, up to $250,000 of your investment is FDIC insured. Whatever exchange you choose, you must do your due diligence to research how your information, trades, and investments are kept secure. And that’s not all. You’ll also want to safeguard your investments on your end.
Here are 5 simple measures to help you use cryptocurrencies securely:
1. Create a new email just for trading.
Emails are frequently attacked so instead of using your personal email, it’s better to create a new email and use it exclusively for cryptocurrency trading. If you have doubts about the security of your email address, there are some specific websites like Barracuda that allow you to check if and how many times your email has been violated.
2. Use a dedicated computer or server for trading.
You’ll need to pay special attention to the computer you use for cryptocurrency trading. This means you should avoid using your home computer and opt for a dedicated computer or a dedicated virtual machine or server. As Apple computers are generally less frequently attacked by malware and viruses, they are a better choice in terms of cyber security. Another main step to operate safely is to use a robust password and a good password manager like LastPass.
3. Enable the second authentication factor on your accounts.
It’s really important to enable the second authentication factor both for accessing your account and for transferring cryptocurrencies. Among the different ways to perform two factor authentication, using SMS is the least secure way. One of the main dangers when using this method is a particular scam that consists in taking possession of the phone of the owner of the account, for example by impersonating the owner of the phone and asking to change the telephone company.
Instead, you’ll want to look into other services including the Google Authenticator, an app you can download from iTunes or Google Play, or Yubico, a USB sticker that allows for identity confirmation when the user connects it to the computer.
4. Don’t store your passwords or account keys online.
It’s extremely important to never save the private keys and all the passwords needed to access your accounts in files that are stored on the cloud, or that can be accessed online. Rather, passwords should be written on paper or stored in a secure Password Manager. You should also consider taking additional measures including making multiple copies, installing reliable antivirus software on your computer and using a hardware wallet like Ledger another wallet to store cryptocurrencies in the long term.
5. Create a final will and testimony.
This may sound extreme, but hear me out. It will be useful to include all the necessary information in a will and testament especially in the case of large amounts of cryptocurrencies. Unfortunately, it happens quite frequently that the IRS cannot take possession of the cryptocurrencies, because they are not able to access the exchange or wallet of the disease in person. This will keep your investments safe for your loved ones.
Andrea Unger is a full-time professional trader, President of The Unger Academy and author of The Unger Method. Andrea is the only Four-Time World Trading Champion, he’s an honorary member of SIAT, and speaks throughout Europe, America, Australia and Asia. Connect with him on Facebook @AndreaUngerOfficial or Instagram @unger_academy.