How To Avoid Risk When Choosing a Cryptocurrency Exchange
A high-profile Canadian cryptocurrency exchange recently made international news for troubling problems. Among the many concerning details that have recently come to light, according to news reports, the founder of the exchange traveled to India and passed away during the trip, leaving behind no one to access the exchange’s private keys to wallets holding its customers’ cryptocurrencies. The exchange filed for bankruptcy reporting almost $200 million in cryptocurrency held on behalf of its customers. There is uncertainty as to how much of that value will be inaccessible or potentially lost forever.
Most of that value rightfully belongs to cryptocurrency traders, who are now in legal and financial limbo, hoping the funds will eventually reappear while waiting for authorities to complete ongoing investigations.
These news stories raise an issue of vital importance for today’s digital asset traders: how do you effectively minimize risk when using a cryptocurrency exchange?
Let’s take a deeper look.
The Evolution of Cryptocurrency Exchange Security
Cryptocurrency exchanges have come a long way in recent years. In the early days of cryptocurrency, exchanges were strictly amateur in nature, run largely by digital asset and cryptography hobbyists. The world’s largest cryptocurrency exchange between 2010 and 2014, for example, was Mt. Gox, a converted website formerly dedicated to the exchange of cards for a game called “Magic: The Gathering”.
As you might expect, given the hobbyist nature of these exchanges and the bleeding edge nature of cryptocurrency development, security breaches were an issue that plagued early traders. Many of these early operations simply lacked the capacity to scale while safeguarding their assets.
Today, that era seems like a distant memory. Digital currency exchanges have professionalized, with some of the world’s most prominent financial organizations either investing in the space or indicating that they have interest to do so. For the most part, today’s traders can rest far easier than the traders of five to ten years ago.
Yet, as current events indicate, risks are undoubtedly still present. Fortunately, by following some smart practices, you can minimize those risks, and help ensure that your assets remain secure.
Minimizing Your Trading Risks
One of the most effective ways to manage your trading risk is by minimizing your exposure. In other words, consider the security of the exchange that you use when you consider how much digital currency you keep on the exchange.
This strategy is more useful for long-term holders. Active traders need immediate access to cryptocurrency markets to take advantage of fast-developing market opportunities. For example, if Bitcoin surges in value, traders typically do not want to wait 15 minutes to transfer to their exchange account before they can trade.
The best way to resolve this issue is simple: be highly discerning in your choice of exchange. Many of today’s top tier cryptocurrency exchanges are as professional and reliable as any conventional financial institution. Smaller, fringe exchanges, however, may lack the expertise, professionalism and resources to effectively secure the assets they hold.
Overall, traders should seek an exchange with robust security (this extends to both your digital assets and your personal information), advanced infrastructure and considerable experience in the financial sector.
Find an exchange that fits those parameters and you’ll help ensure that your risk level is controlled.
Bitvo: Making Security a Core Priority
If you’re looking for a trusted cryptocurrency exchange to help you purchase Bitcoin, Ether, XRP and other digital assets, we urge you to consider Bitvo. Bitvo is run by an experienced team of financial services, payment processing and banking professionals who are dedicated to ensuring a professional, transparent and efficient cryptocurrency exchange experience. Bitvo operates on a full reserve basis at all times, which means that your funds are always your funds. Additionally, we adhere to best-in-class security policies and procedures to ensure both your personal information and your assets are safe and secure. This includes utilization of offsite, third party, air-gapped Cold Storage that is only accessible with multiple signatures.
For more information about the vigorous steps Bitvo takes to secure your assets, please click here.