How to Trade and Store Crypto Assets Safely

Cryptocurrencies are a world that grows on self-sovereignty, an idea that users should be responsible for their actions. Therefore, learning how to protect your crypto assets is the most critical step before getting into the rabbit hole.

Buy Cryptos Safely

Just as you would not put your money in a bank with a bad reputation, the credibility of an exchange where you buy and trade cryptocurrencies is what you should carefully examine.

There are many platforms for buying cryptos, including centralized exchanges (CEX), decentralized exchanges (DEX), and P2P trading platforms. Each venue has its safety factor, as well as pros and cons. CEXs are convenient and safe for most crypto traders. 

Choose a Safe Trading Platform

CEXs, including Huobi, provide security through intensified management. Additionally, with improved transparency and external monitoring tools, such as the Merkle Tree, Huobi allows users to check their assets anytime.

Before making any transactions, you are required to transfer your funds to a custodial wallet. This will entrust the platform to keep your tokens safe. For participants unfamiliar with wallets or new to the crypto world, using a wallet provided by the venue can avoid the risk of losing their crypto assets due to wallet keys.

A peer-to-peer (P2P) service requires ID verification for both parties. Additionally, custody services should be in place, if possible. A third party holding the assets in custody protects both parties from credit risk, although other risks may still exist.

How to Ensure Account Security

Securing an exchange account is similar to protecting an online bank account. You can prevent account and fund thefts by taking the following actions:

1. Use strong passwords and change them regularly. A password should contain little personally identifiable information, such as your birthday, and should consist of symbols, numbers, and uppercase and lowercase letters.

2. Enable Google Authenticator. Google Authenticator will act as a second line of defense in case of password leakage. When logging in, you are required to verify your password and Google Authenticator.

3. Beware of viruses in malicious links, and do not download software from unknown sources.

How to Store Cryptos Safely

Crypto assets gained from trading should be stored in a safe place. The best option is to put them in a wallet unless you keep them in the platform for future transactions.

1. Hot wallets vs. cold wallets

Hot wallets are digital currency wallets connected to the Internet. They provide the most consistent and smooth user experience, making it easy to send, receive, and trade digital currencies and tokens. Such convenience, however, comes at the cost of security.

Being connected to the Internet makes hot wallets vulnerable to viruses and more likely to be remotely accessed by criminals.

But this does not mean that hot wallets are unsafe; they are just not as secure as cold wallets. Moreover, hot wallets are easier to use and therefore are the first choice for holding coins in small amounts.

To avoid being attacked, many choose to keep their keys offline. Cold wallets are designed for offline storage. Unlike hot wallets, cold wallets do not connect to the Internet. Paper wallets, a piece of paper printed with the wallet's private key (usually a QR code), were used in the crypto world. Today, hardware wallets adopt a similar mechanism to store private keys offline while improving user experience. Specially developed for crypto storage, these wallets are more portable and less expensive.

2. Custodial wallets vs. non-custodial wallets

You can choose a custodial or non-custodial wallet in hot wallets. Using a wallet provided by the platform, or a custodial wallet, means that you do not hold the private key. In most cases, the venue puts your funds in a hot and cold wallet to facilitate fast deposit and withdrawal while ensuring asset security.

Storing in cryptocurrency trading platforms is convenient for users willing to entrust their funds to third-party custody. However, those who hold their keys have to bear the responsibility for themselves when problems arise. Once the key is destroyed, no one will be able to withdraw your assets. On the other hand, if you lose your account password, all you have to do is to reset it.

3. Choose the proper way to store your crypto assets

A custodial wallet is the best solution if you are a frequent trader or loaner. It is recommended to develop a detailed plan for fund allocation, such as a position sizing strategy, before making any deposits. Never invest more than you can afford, as cryptocurrencies are highly volatile.

4. Limit your wallet interactions to credible projects

Allowing your wallets to only interact with audited projects makes your assets more secure. Auditors spot backdoors, exploit scripts, and other security issues and report them to the project creator, who will change the codes accordingly. Moreover, the entire audit process is presented to users in the final report. An audit helps you exclude irregular projects, although it cannot guarantee the long-term security of a project.

Conclusion

Today's blockchain technology provides various measures for the security of cryptocurrencies. Users should understand the advantages and disadvantages of each solution. Do your research before trading on any platform.