Crypto Risk Management: Safeguard Your Funds!

Storing your cryptocurrencies on exchanges can be risky, and leaving them there for long periods of time is dangerous. Cryptocurrency platforms have been plagued by bugs, hacks and exploits that have resulted in millions of dollars in losses in their short history. This is why crypto risk management is important to get your wealth off the exchanges and into your own hands.

Risks of Crypto Exchanges

Exchanges are a popular target for hackers because they store large amounts of money in digital wallets. If an exchange is hacked, the hacker can get away with a large sum of money, and there is no guarantee that you will get your money back. Whether you want to buy bitcoin online with a debit card or want to exchange a crypto pair, you should always think about security.

Another risk to consider is that exchanges may go bankrupt. This happened to Mt. Gox, which was once the largest Bitcoin exchange. Mt. Gox went bankrupt in 2014 after it was revealed that 850,000 bitcoins had been stolen from the exchange. This caused many people to lose their money as they could not get their money back from the bankrupt exchange.

How to keep your cryptocurrency safe

There are different ways to store your cryptocurrencies. The most popular storage option is a wallet, which can take many different forms:

  • hardware wallets;
  • paper wallets;
  • software wallets.

Hardware wallets are physical devices that securely store your private keys and keep them offline. They are considered to be one of the most secure storage options because they are not connected to the internet, making them very difficult to hack.

Another option is a paper wallet, which is simply a piece of paper with your private keys printed on it. This may sound insecure, but keeping your paper wallet in a safe place can be a very safe way to store your cryptocurrency.

You can also use a software wallet, a program that stores your private keys on your computer or mobile device. Software wallets are convenient because they’re easy to use, but they’re not as secure as hardware wallets because they’re connected to the internet.

No matter which storage option you choose, it’s important to keep your private keys safe. If you lose your private keys, you lose access to your cryptocurrencies.

Is Cold Storage the Safest Option?

The best way to keep your cryptocurrency is with cold storage. Cold storage refers to storing your private keys offline. This can be done on a physical device like a hardware wallet or on a piece of paper.

Cold storage is the safest way to store your cryptocurrency as it is not connected to the internet, making it impossible for hackers to access. Cold storage is also convenient as you can store it anywhere, e.g. B. in a locker or in a drawer.

The downside to cold storage is that it’s not as convenient as other storage options. If you want to use your cryptocurrency, you need to take it out of cold storage and put it in a hot wallet. A hot wallet is a wallet that is connected to the internet. They’re handy because they’re easy to use, but they’re not that secure. Often they are more prone to hacks.

How to cash out your cryptocurrency

If you want to cash out your cryptocurrency, you need to find a buyer willing to pay you in fiat currency like dollars or euros. This can be done through online exchanges or peer-to-peer marketplaces.

Once you find a buyer, you need to send them your cryptocurrency. To do this, you need to give them your public key, which is like the address of your cryptocurrency. The buyer then sends you the fiat currency to your bank account. It is important to remember that you are responsible for paying all taxes on the sale of your cryptocurrency.

Conclusion

It is important to take crypto risk management measures to protect your assets by keeping your cryptocurrencies in a safe place. There are many different storage options, and the best option for you depends on your needs.

If you want the highest level of security, you should keep your cryptocurrency in cold storage. However, if you want convenience, you may prefer to use a hot wallet. No matter which storage option you choose, it’s important to keep your private keys safe.

Article on crypto risk management and permission to publish here provided by Astrid Meier. Originally written for Supply Chain Game Changer and published on September 17th, 2022.

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