We tell you what catastrophes can happen with your crypto-currency investment portfolio so that you can protect yourself.
Phishing and billing
Imagine that you decided to transfer a few coins to a friend. You copy the address of his wallet , but at the last second, just before you press the "send" button, the virus sitting on your computer, this address replaces. Not everyone will come up with a second time to check the address before sending, especially since this is a long string consisting of random characters.
In the case of phishing, the attacker clones the site of a popular crypto exchange or purse and collects passwords of users, and, unlike traditional banks that have control tools and client funds insurance, crypto-currency services do not have anything. In addition, the bank can sometimes cancel fraudulent transfers on time, and operations with crypto-currencies are irreversible.
Hacking of the payment gateway
In June last year, the popular online purse Ethereum Classic began to withdraw money from customers' wallets – hackers were able to introduce themselves to the service hosters domain owners and add code to intercept transactions.
Fortunately, the hackers were greedy, they started withdrawing money too quickly, and the theft became obvious, yet in a few hours they managed to steal 300 thousand dollars, and if the problem were not noticed on time, the damage could be much greater.
From such troubles are not insured and traditional financial institutions, and in history there are examples where hackers managed to hack even banks.
Address error
Crypto currency has some drawbacks, and users have to be very careful: when sending funds, you can make a mistake in the address or simply send money to the wrong person.
So, for example, if the user Ethereum enters the address of the recipient's ETH purse without the last character, the amount sent can disappear for good, and can go to the desired wallet, but increase 256 times.
In bitcoin, in this sense, there is an advantage: it checks the existence of the address, but you can still make a misprint and thus lose a large sum.
Lost wallet file
Another risk for users of crypto currency is to lose the wallet. Not a physical wallet with money and cards, but a file with personal keys, giving access to the tools that most store on the computer, and which can therefore be stolen by hackers or a chasm in case of a hard drive failure or loss.
How to solve this problem? You can create multiple backup copies of a file or buy a USB wallet. You can also use the "cold" storage, but this is a service for the rich, but they are always small.
Today, traditional financial institutions are much safer to use than decentralized crypto-currencies, because they take various measures to ensure the security of their customers, including offering two-factor authorization and one-time codes.
Fraudulent ICO
The advent of crypto currency allowed start-ups to raise funds for their projects literally "on the knee" – for this there was nothing to do but access to the Internet.
The Ethereum platform , which hosts almost all ICOs , is a very important development, but the unregulated market appears to create a lot of problems, and investors do not simply have no guarantees – they can not even assess their risks. The only thing that remains for them is the reputation of the founders of the hope that investments will pay off.
As in the real world, most of the crypto-currency start-ups do not work out – yes, there is a good idea, but this does not mean that a profitable business will grow out of it. In addition, the owner can simply take all the funds collected during the ICO and leave investors penniless, because, thanks to the anonymity of the crypto currency, it is easy to launder this money.
Fake user address
When the ICO starts, a public address is posted on the site dedicated to it, to which investors can send money, and this also opens up opportunities for abuse.
There was a case when an attacker hacked the site during fundraising and changed the address of the company to his – in two hours he managed to steal more than $ 8 million from investors. The company even warned people that the address was forged, but to no avail – investors continued to send money to the address of the hacker, and the attacker earned another $ 2 million.
Bitcoin will lose attractiveness
In mid-2017, a fork was conducted, which split bitcoin into two parts – Bitcoin and Bitcoin Cash, which focused on increasing network bandwidth and transaction speed, reducing commissions and the speedy spread of technology.
But what happens if the business turns away from bitcoin? Now more than 150 companies work with Ethereum blockbuster and smart contracts on it, and these contracts allow you to check transactions and perform them under certain conditions, while it is impossible with bitcoin. If the number of people who prefer Ethereum, will grow, the price of bitcoin may fall.
Large enterprises will cease to accept crypto-currencies
Over the past two years, more and more retail organizations are beginning to accept bitcoins and other coins as a means of payment, and some investors consider this a good sign and an excuse to buy crypto-currencies while they are inexpensive.
But this can also become a source of frustration. If bitcoin's volatility does not decrease, it may very well be that the business will eventually cease to accept virtual currency. The matter is that deals with bitcoins are processed rather slowly, and therefore, between the moment when the buyer transferred the money and converting them into a hard currency, the price may fall and the seller will be the loser.
And, if the prevalence of bitcoin as a means of payment drops, investors will also suffer.
Excessive regulation
In March 2017, Japan recognized the crypto currency as a legal tender, and in December of the same year the CME Group announced that it would begin offering bitcoin futures , that is, it strengthened the market with a new investment tool.
And in the same year, in October China and South Korea banned the ICO, and the PRC even banned the work of exchanges in the country. As we see, much depends on the actions of the governments, and regulation can both help and damage the work of the crypto currency.
Hacking of crypto-exchange exchanges
In the world, crypto-currency cyberattacks are not uncommon, but sometimes the consequences are particularly large. Just four years ago, when the share of the Japanese stock exchange Mt. Gox accounted for more than 75% of all bitcoin trade , it was hacked. The exchange had to file an application for bankruptcy; she said that coins worth $ 6.9 billion were stolen, as were assets in traditional currency. After this event, the market had to recover for a long time, and bitcoin then lost about 80% of the cost.
Now we are seeing a similar situation with Bitfinex – the exchanger is responsible for processing about 50% of all bitcoins-transactions. If Bitfinex is hacked, this will greatly destabilize the market and drop the cost of the crypto currency.
Margin calls
When in 2018 the CME Group brought to market bitcoin futures, everyone was full of optimism. It was believed that this is a very positive event for both the crypto-currency market and Wall Street, as futures allowed financial institutions to own bitcoins without the need to use decentralized exchanges. In addition, some believed that this event would lead to a decrease in the volatility of the currency. However, it seems that not everyone understands the situation.
The fact is that the appearance of futures for the first time allowed financial institutions to bet on bitcoins and use them in hedging. In addition, people with very different degrees of financial literacy can now trade with their shoulders and play on a slide, which is very risky when it comes to such a volatile asset.
If at some point the value of the crypto currency will swing strongly up or down, it can cause an avalanche of margin calls, which further destabilizes prices. In this case, unlike other investment tools, speculation does not limit anything.
Emotion of investors
Also, the drop in prices for bitcoins and other crypto-currencies may be caused by the insecurity of private investors in the market, as they are the main force on it. Compared to investment firms, retail investors are much more emotional in making decisions, which can result in irrational actions on the wave of emotions.
Most of the sharp fluctuations in the price of bitcoin and other crypto-currencies were the result of a panic – or, conversely, a feverish buying-up of assets.
