Cryptocurrencies like Bitcoin and Ethereum have gained a lot of attention over the past few years. However, investing in cryptocurrencies comes with a unique set of risks. One of the biggest risks is that you could lose your investment if the cryptocurrency exchange it’s stored on goes bankrupt, like we recently saw with Sam Bankman-Fried and FTX. This is because exchanges are not regulated like banks, and they do not have the same safeguards in place to protect customer funds. As a result, if an exchange goes bankrupt, its customers could lose everything. If you’re thinking about investing in cryptocurrencies, it’s important to be aware of these risks and take steps to protect yourself.
The Crypto You “Own” Might Not Actually Be Yours
If you own cryptocurrency, there’s a good chance that it’s not really in your possession. That’s because many people store their digital tokens on exchanges. However, exchanges are not for storage either hot or cold. In other words, if you want to keep your crypto safe, you need to take responsibility for your own security. Otherwise, you risk losing everything.
You Could Lose Your Assets If the Exchange They’re Stored on Goes Bankrupt
When you invest in cryptocurrency, you’re not just buying a digital asset — you’re also entrusting that asset to an exchange. And, as we’ve seen time and again, exchanges can go bankrupt. If that happens, your cryptocurrency could be lost forever.
This is because most exchanges are centralized, meaning they control the private keys to your crypto. This may seem like a good thing — after all, it gives them responsibility for keeping your funds safe. But it also means that if the exchange goes under, your crypto goes with it.
There have been a number of high-profile exchange bankruptcies in recent years, and each time, investors have lost access to their funds. So if you’re thinking of investing in cryptocurrency, it’s important to understand the risks involved. Make sure you do your research and only invest what you’re willing to lose.
How to Properly Store Assets on the Blockchain
The idea of storing your assets on the blockchain might sound a bit complicated, but it’s actually quite simple. There are two main ways to store your assets on the blockchain: hot wallets and cold wallets. Hot wallets are connected to the internet and are therefore more vulnerable to hacks. However, they are also easier to use and can be accessed from anywhere in the world. Cold wallets, on the other hand, are offline and provide greater security, but they can be more difficult to set up and use. If you’re looking for the safest way to store your assets, you should consider using a hardware wallet. These devices are specifically designed for storing cryptocurrencies and providing security against hacks.
If you don’t hold your keys, you don’t own your crypto. This means that if an exchange goes bankrupt or is hacked, your assets may not be safe. There are two main types of wallets for cryptocurrencies: hot wallets and cold wallets. Knowing which type of wallet is best for you depends on what kind of investor you are. For long term storage, a cold wallet is the best option, but for quick transactions a hot wallet is ideal. Properly securing your cryptocurrency assets is essential to protecting your investment, so make sure to use a cold wallet if you want to keep your funds safe!