Can You Lose Your Bitcoin Forever? Here's How To Prevent It!

True Root Financial is a financial advisor and financial planner based in San Francisco, CA. We serve clients across the globe.

Cryptocurrencies are digital or virtual currencies that use cryptography for security. Bitcoin, created in 2009, was the first decentralized cryptocurrency. Since then, thousands of alternative cryptocurrencies have been developed, including Ethereum, Ripple, Litecoin, and many others.

Key Takeaways:

More than 100 billion in bitcoins have been lost by people
Be cautious of phishing scams, malware attacks, and other cyber threats targeting cryptocurrency holders
If you get a scam call, you can log into your Coinbase account and verify with customer support if the call is legitimate.
Utilize strong passwords, two-factor authentication (2FA), and reputable exchanges to protect against theft and scams
Stay informed about evolving regulations globally to navigate legal risks associated with cryptocurrencies
Diversify your cryptocurrency investments and prioritize assets with higher liquidity.

Tips For Tech Professionals To Manage risks in Crypto Investments

Even though you might be familiar with the technology behind how cryptocurrencies work, you still need to make sure that you are well-versed in understanding the cybersecurity aspects of crypto.

Secure Your Investments

Use strong security practices to protect your crypto assets from theft and loss. You losing the access means others gaining access to your account. Did you know that over $100 billion worth of Bitcoins has been lost by people? According to Chainalysis, in 2023, $24.2 billion worth of crypto-assets were received by identified illicit addresses, accounting for 0.34% of total on-chain transaction volume.

Not only this, scammers have developed new strategies, including ‘romance scamming’, where they build relationships with individuals and then propose fake investment opportunities.

Are you getting scam calls & emails?

Attackers may create fake websites or send emails that look like they come from legitimate cryptocurrency exchanges or wallet providers. Once you enter your information, they gain access to your accounts and can steal your funds.

They might contact you by phone as well. You could receive a call from someone pretending to be from Coinbase, asking for your personal information. In such cases, it’s best to log into your Coinbase account and verify with customer support if the call is legitimate.

How can you avoid being in this trap?

In such cases, it’s best to log into your Coinbase account and verify with customer support if the call is legitimate.
Always double-check website URLs before entering any credentials. For instance, recent news highlighted a massive phishing scam targeting Ledger wallet users through fake emails and websites.
Do not click on links in unsolicited emails or messages. Navigate directly to websites by typing the URL. One investor lost over $50,000 in Bitcoin by clicking on a malicious link sent via email.

Hacks and Breaches

Cybercriminals exploit vulnerabilities in exchanges and wallets to steal cryptocurrencies. Even well-known exchanges have been hacked, resulting in significant losses for investors.

Source: Immunefi

The above chart reveals that in Q1 2024, the cryptocurrency sector experienced total losses of $336,311,217, primarily due to hacks ($321,645,400) with a smaller portion from fraud ($14,665,817). All losses occurred in decentralized finance (DeFi), highlighting its vulnerability compared to centralized finance (CeFi). Major losses were recorded by Orbit Bridge ($81.68M) and Munchables ($62.80M), among others. Ethereum-based platforms were the most affected indicating that Ethereum is a major target for security breaches. These findings emphasize the urgent need for enhanced security in the DeFi sector.

3 common ways crypto traders can save their coins from hacking:

Use Reputable Exchanges: Choose well-established exchanges with strong security measures and a history of safeguarding user funds. In 2023, Binance thwarted several hacking attempts due to its robust security infrastructure.
Enable Two-Factor Authentication (2FA): Add an extra layer of security to your accounts by using 2FA, preferably through authentication apps like Google Authenticator. This simple step can prevent unauthorized access even if your password is compromised.
Regular Security Audits: Ensure the platforms you use conduct regular security audits and have insurance to cover potential breaches. For example, Coinbase has a comprehensive insurance policy to protect user funds in case of a breach.

Is your device not in your control?

Attackers might steal your private keys or lock you out of your accounts. Cryptojacking, where malware mines cryptocurrency on your device without your knowledge, is also a growing threat. In 2023, MGM Resorts did not pay the ransom and the estimated damages cost the business over $100 million.

Use reputable antivirus and anti-malware software to protect your devices. In recent months, there has been a rise in malware specifically targeting cryptocurrency wallets.
Only download software and updates from official sources. Malware disguised as legitimate software is a common tactic used by cybercriminals.

You have Weak Passwords

Weak or reused passwords make it easier for attackers to gain unauthorized access to your accounts. If one of your accounts is compromised, attackers can try the same password on other accounts, leading to a domino effect.

Use Strong Passwords: Create complex passwords that are difficult to guess. Use a combination of letters, numbers, and special characters. Password managers like LastPass or 1Password can help generate and store strong passwords securely. Reusing passwords across multiple accounts can lead to a domino effect if one account is compromised.

Insufficient Liquidity

Invest in cryptocurrencies with higher liquidity to ensure smoother and more stable transactions. Allocate 10-20% of your portfolio to stablecoins like USDT or USDC, which can be easily traded for other cryptocurrencies or fiat currencies when necessary.

Regulatory Considerations

In some instances, governments might try to completely shut down cryptocurrencies, as some countries have already banned them for reasons such as their appeal to criminals for money laundering, tax evasion, and illegal transactions. Authorities are worried that cryptocurrencies are being used to finance terrorism, drug trafficking, and other unlawful activities.

Changes in regulatory environments can affect the legality and value of cryptocurrencies. Governments around the world are still developing their approaches to regulating digital currencies, leading to uncertainty and potential legal risks.

Bottom line: Keep up with regulatory news and developments in your country and globally. For instance, the recent SEC lawsuit against Ripple has had significant implications for XRP’s value.

Diversify Your Portfolio

Spread your investments across multiple cryptocurrencies instead of putting all your money into a single asset. Diversification helps mitigate the risk of any one asset’s poor performance affecting your entire portfolio.

Next steps for you

Learn how to protect your Bitcoin and other cryptocurrencies from loss and theft. Book a call below to discover essential tips and strategies to safeguard your investments in the volatile world of digital currencies.

Can You Lose Your Bitcoin Forever? Here’s How To Prevent It!

Key Takeaways:

Tips For Tech Professionals To Manage risks in Crypto Investments