Like any investment asset, investing in cryptocurrencies holds some financial risks. Alongside the stories of people getting rich from crypto, you must’ve also heard some stories about people losing fortunes too.
There are many ways to lose your funds in crypto, and due to its technical nature, some of these go beyond unfortunate investment decisions. Here are some scenarios that can result in massive losses, and how to protect yourself from them.
Market losses
Cryptocurrencies are still a relatively new class of assets, and we see a lot of projects rise and fall every year. In some cases, the coins you’ve invested in might suffer a sudden drop in their price, and even go down to almost zero value.
There are two things you can do to protect yourself from losses associated with market movements:
- Diversify your portfolio: Don’t put all of your eggs in one basket. Make sure your investments are distributed on several projects and cryptocurrency types. This way if one asset fails, the losses you’ll have to deal with would be marginal, and your other assets would keep your investments at a reasonable value, and maybe even make you profits that compensate for your losses.
- Stop loss orders: When you buy an asset, decide how much is the drop at which you’d rather exit and sell the coin. Set a stop-limit order from BitOasis Pro to get your coins sold automatically at the best possible price after the coin’s price drops to the minimum price you can handle.
Crypto transfers
One of the advantages of owning cryptocurrencies is the ease and speed at which you can transfer funds from one place to another, but this comes at a price. Many people lose funds on their way from one address to another, whether they control both addresses or not.
The way blockchain works, this wouldn’t happen due to technical errors. It can only happen if you fail to fill in all the details correctly.
When you’re sending crypto, make sure you’re doing it over the correct network, as some cryptocurrencies can be moved through several networks. Also, make sure you copy and paste the address or use QR codes; never type it yourself as this is very likely to result in typing one or two characters incorrectly and losing the funds you’re sending. The same thing applies to tags and memos, which you should always be sure if they’re needed or not before sending the coins through.
Hacks and attacks
Even though a blockchain address is almost impossible to hack, if you’re not cautious enough with how you handle your accounts and data, you could lose a lot of money to malicious attacks. This starts with the password you choose for your crypto exchange account, which should be a strong one, not used somewhere else, and for sure not shared with anyone but yourself. You can read a few tips on how to secure your password here.
It’s advisable to add an extra layer of protection to your BitOasis account by using authenticator apps for multi-factor authentication (MFA), which is known to be more secure than using SMS codes for login confirmation. You can read more about the benefits of using MFA and how to do it on BitOasis here.
Also, many phishing attacks happen when you’re not suspicious enough about the emails you receive and people who contact you with “investment opportunities” online and offline. There are a few questions you should ask yourself to determine whether you’re under a phishing attack: Is the message too good to be true? Do you know the sender or does the address look suspicious? You can find here a few useful tips on how to protect yourself from phishing attacks.
Important Notice: BitOasis does not provide investment or legal advice. If this content, including attachments, contains guidance or expresses a view, this is not to be considered or relied upon as investment or legal advice and it is recommended that you obtain independent professional advice. Cryptocurrency trading/investing involves a substantial risk of loss and may not be suitable for every investor. If you do not fully understand these risks, you must seek independent advice from your financial advisor.