The Inherent Risks of Cryptocurrency Exchanges (and How to Avoid Them)
Although the cryptocurrency industry has received massive coverage in recent years and has attracted the eyes of many ambitious traders, cryptocurrency has been around since the late 2000s, and there is a lot to learn from its early history. Take, for example, the Mt. Gox scandal that crashed the market in 2014 and significantly impacted overall confidence in digital assets. It was during this time that we began to learn more about the risks of cryptocurrency, especially when it comes to the exchanges on which they are traded. That said, what are these risks, and what can you do to make sure that you do not fall victim to them?
Cryptocurrency Trading: Risks and Benefits
The cryptocurrency market has become popular among traders because of its great risk and even greater reward. Unlike other investments, cryptocurrencies such as Bitcoin are incredibly volatile, which can result in large price swings in a matter of minutes. For those who study the market, this could mean profitable gains on their initial investments that can’t be found in other investment opportunities. However, this potential in cryptocurrency trading also comes with the risk of losing an equally large sum of money should the value of a given cryptocurrency plunge after an investment is made. There is also the issue of security issues posed by exchanges that hold these assets for traders. Although cryptocurrencies give you access to a digital store of value that is controlled by you, storing assets in exchanges allow for more vulnerability than other storage methods. We will cover this in greater detail below.
Cryptocurrency Exchanges: What Are They?
Cryptocurrency exchanges are websites that give you a place to store and trade your cryptocurrency assets for other crypto assets or for traditional fiat such as the U.S. Dollar. This is accomplished by providing you with a wallet (online storage for cryptocurrencies) on the platform that you have access to while you are using the exchange. You can deposit, withdraw, and trade funds as long as there are funds available on your account. Because your wallet is online 24/7, however, hackers are able to target more vulnerable exchanges and gain access to these wallets, draining the funds from users. A high-quality cryptocurrency exchange will make sure to implement the proper security practices, such as two-factor authentication and the use of multiple hot and cold wallet options to secure funds. However, not all cryptocurrency exchanges provide you with bank-level security.
The Risks of Unsecured Cryptocurrency Exchanges
Returning to the example of Mt. Gox above, the reason why it fell through was due to the fact that there were no security precautions. When cryptocurrency exchanges do not have the proper security software to defend against hackers, lack the protection to secure and authenticate user accounts and identities, or fail to use multiple storage methods to ensure that crypto assets are safe in the event of a hack, this makes it extremely easy for malicious parties to gain access to the exchange and break into wallets, transferring large quantities of cryptocurrency at a time. The bad news? Once cryptocurrency has been transferred, there is no possibility of recovering it. This is why cryptocurrency exchanges must adhere to proper security precautions to protect your assets against hackers and to ensure the best cryptocurrency trading experience.
Starting Your Cryptocurrency Journey Right With ROKKEX
If you’re looking for a cryptocurrency exchange that protects your assets and gives you the opportunity to trade your digital assets and grow your wealth, ROKKEX is a crypto exchange that you can trust. Built by cybersecurity engineering professionals, ROKKEX is an exchange that puts security first rather than treating it as a secondary focal point in the development of their platform.
As you have learned in the previous sections, many cryptocurrency exchanges leave you vulnerable to the possibility of losing your assets. Hackers abound in this market, but not every exchange understands the importance of utilizing the proper safety methods to protect funds and users against online attacks. By focusing on security and making sure that both their investors and traders on the platform are protected and taken care of, ROKKEX provides you with a safe environment to trade your funds so that you can engage in the market without having to worry about losing your cryptocurrency assets to malicious actors. Whether you are a seasoned trader or someone who is just learning about cryptocurrency, you deserve to feel safe when you are both using or holding your funds in any given platform.
If security and safety are essential to you when you are trading your digital assets, learn more about the exchange and what you can do to further their mission by clicking on the link above!
About the Author
Bibhuranjan Editorial Officer, technofaq.org I'm an avid tech enthusiast at heart. I like to mug up on new and exciting developments on science and tech and have a deep love for PC gaming. Other hobbies include writing blog posts, music and DIY projects.
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