Did you know that on a daily basis, someone loses their crypto on an exchange? Every year, there are on average five major hacks against leading crypto exchanges. Sometimes this causes tremendous fallout, especially if investors lose all their life savings. Sometimes, some of the wealthier exchanges pay for the loss to protect their reputation.
But short of being compensated by an exchange with bad security, what protections are there for traders? Here is a list of eight things you can do to trade safely on exchanges.
Table of Contents
Know Your Exchange
Before using any crypto exchange, you should find info about them. This includes many basic details, like who operates the exchange, where it is based, and whether you have any protections in your jurisdiction. While almost none of the exchanges are regulated, the more reputable ones will try to fit their business models into existing regulatory guidelines.
Regulation is often seen as a bad thing, but in truth, it can help protect you while you invest in crypto.
Your next port of call should be Reddit. There are extensive conversations and active crypto communities on Reddit that have tried and tested the major exchanges thoroughly. You can ask for advice or share your own experiences there. The only downside to Reddit is that a lot of the time, the discussions are around major crypto exchanges and some of the niche and smaller exchanges don’t get talked about.
This can be a bit annoying if you want to try a smaller exchange.
Check Other Online Communities and Forums
While Reddit can be a great place to start, you shouldn’t stop your crypto quest for knowledge there. The internet is chock full of crypto communities that can help educate you as well as offer much-needed advice about trading and staying safe. Remember that not all these communities are safe, so guard your personal information while taking part in conversations online.
Avoid the Exchange Wallets
Exchange wallets come in multiple forms. Most commonly the exchange wallets will be community wallets that the exchange uses to move funds about and store user money. These wallets are always being targeted by hackers because of the huge amounts of money held in them.
As a result, you should avoid using exchange wallets for any longer than you need to, ensuring you withdraw your crypto funds to your own personal wallet. Some exchanges also have their own wallet that they advertise to get new users — these are notoriously bad as well, so try and avoid them too.
Check Exchange Guidelines
Any reputable exchange will have a set of rules and guidelines for users to follow to keep the exchange community safe. Reading guidelines can seem laborious but the truth is, they are there to help you stay safe on that particular exchange. Guidelines are useful even on the most secure crypto exchange. Read more to find out .
Take note of anything the exchange expects you to do and also look to see if the exchange offers you any protection while trading. Some will guarantee trades up to a certain value for users.
Use the Right Wallet
Not all wallets are good wallets — in fact, many are pretty awful. Remember that you need to find a wallet that supports the currencies that you’re looking to trade-in. Don’t just assume that your wallet will hold all crypto tokens. Also, hot and warm wallets will have avenues that hackers can exploit because they are typically connected to the internet.
It is best to pay for a hardware (cold) wallet as these wallets support a huge range of coins and keep your currency much safer than other wallet solutions.
Guard Your Details
You wouldn’t let someone examine your credit card and you wouldn’t divulge your bank details. So, don’t give away your wallet details to anyone under any circumstances. The only information you need to share is your public key — everything else is yours to know only.
Also, when it comes to remembering passwords etc., don’t be afraid to write them down on a pad and save them in a locked drawer at home. The type of criminal that hacks a computer system is a very different criminal to the one who breaks into your home. Don’t lose important passwords and access to your funds because you have been scared into not recording vital information.
Approach Every Trade with Caution
Whether it is your first trade or your millionth trade, always be vigilant and alert. If something doesn’t feel right, then don’t do it. Trusting your gut, especially when picking and using a crypto exchange, is a great way to protect yourself.
Sometimes, you will pick up on small red flags — don’t ignore them. Always trade in a way that protects your funds.