In November 2022, the world will The sudden collapse of one of the largest crypto exchanges in the cryptosphere. FTX has largely faced a liquidity crisis, with its founder and former CEO Sam Bankman-Fried (SBF) implicated in the turmoil.
As a result, the incident that happened in just a few days affected the volatility of the entire crypto market, dropping its value. less than $1 trillionMost of all, FTX investors and customers felt cheated and many others in the crypto space More Skeptical About Crypto Investing Fear of similar repercussions.
However, this is not the first case. Other crypto giants such as Celsius and Voyager have followed similar paths, from suspending customer withdrawals and filing for Chapter 11 bankruptcy to mishandling customer funds. . So, should users keep their cryptocurrencies in exchange wallets? Investors/users should reconsider the safety of digital assets.
3 Best Crypto Investment Practices to Protect Your Digital Assets
As outlined above, the collapse of the FTX crypto exchange has caused many investors to rethink their overall approach to investing. Now they are concerned with taking the necessary steps to control their assets and protect them from fraud, hacking and embezzlement. These measures include:
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Transferring assets to hardware wallets
The phrase “not your keys, not your coins” is often used in cryptocurrencies. It simply means that you have no control over your coins if another party holds them and keeps them safe. If they decide to do so, the exchange will manage their private keys. What are viable and safe alternatives?
We strongly recommend that users transfer their assets to a hardware wallet. This allows investors to fully own the keys of their crypto wallet. Therefore, only the owner can access the assets in the wallet. Additionally, the risk of losing funds through fraud or hacking is minimized.
However, it’s worth noting that hardware wallets are just as secure as the user. Therefore, the less people know your wallet, the safer it is.
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Consider self-custody of assets
Using a custodial wallet is a user-friendly solution as individual users do not have to stress about managing private keys. Instead, the crypto exchange is responsible. However, the same users are at risk if the exchange is hacked. Additionally, exchanges may deny users access to their tokens. have seen before By some crypto companies in 2022.
Non-custodial wallets, on the other hand, allow users to control their assets as they always have full custody. Therefore, users are not restricted like custodial wallets.
Self-custody is a great way to protect your digital assets, but it comes with a huge responsibility for you to manage your private keys. If you lose your wallet’s private key, you lose your assets. Therefore, as a user, I pay attention to good password management and safe online security practices while using non-custodial wallets.
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Conduct proper research on the PoR of the exchange
“don’t trust, verify” is one of the most popular phrases on Bitcoin Twitter among crypto enthusiasts and communities. As a cryptocurrency supporter, I still believe this phrase is one of cryptocurrency’s core mantras. This means that trust is essential even when dealing with crypto exchanges.
The collapse of investor confidence by exchanges has been a common trend, as seen in the recent cryptocurrency crash involving players such as FTX, Celsius, Terraform Labs and Voyager. It’s time for investors to do a proper due diligence on exchange margin (PoR) to make sure that a particular firm has enough assets to cover their client’s balance.
As a result, popular cryptocurrency exchanges understand the need for PoR and it is now emerging as a trusted standard.Therefore, we recently witnessed the publication PoR by various exchanges To enable each customer/user to check the status of their funds and deposits.
final thoughts
As recent events in the cryptocurrency industry have shown, you need to be careful how and where you store your digital assets. Holding or holding assets in a hardware or non-custodial wallet and conducting proper research on his POR of the exchange are some of the best ways to protect your crypto assets. These practices don’t necessarily protect the value of your assets, but they do provide protection from possible restrictions and grant you full ownership over your assets.
But let’s say that users find it expensive or complicated to use hardware wallets or self-custody as an alternative way to protect their crypto assets. In that case, you should consider using a regulated cryptocurrency exchange that is transparent and has a good reputation in the industry.