How to Protect Your Cryptocurrency from Exchange Bankruptcy

 

When an exchange goes bankrupt, it can cause many people to lose their crypto which can be a big blow to those people and their crypto portfolio. However, if you follow these steps and keep your crypto in your possession you will be safe from this happening to you. We recommend that you take one step at a time and make sure that you complete each step successfully before moving on to the next step. These steps will help you protect your crypto from exchange bankruptcy, especially if the exchange goes bankrupt due to poor security measures or poor management practices of the exchange.

 

Move them to a private wallet

If you have a digital currency, such as bitcoin or ether, that is held by an exchange like Coinbase, Circle or Bitstamp and they go bankrupt (such as in 2014 when Mt. I can get lost. Fortunately, there is a way to avoid such pitfalls! You can hold crypto assets with any third-party service provider if you do not store them on a centralized server. An alternative to storing crypto assets without relying on a third-party service provider is through MetaMask or some other private wallet you can find. It gives you decentralized access to the Ethereum DApp. Meaning - It doesn't store your keys anywhere but instead uses local Storage to save the keys. Now if you lose your password then yes, your money will be lost forever. So, make sure no one else has access to your device which has Metamask installed. If someone else gets access, delete everything immediately and create a new account. Plus, it will help you back up your keystore file in case something goes wrong with MetaMask.

 

Download backup phrase

You should have a backup phrase, not just a private key. If you forget everything else, you can still restore access to your coins with the backup phrase. Many wallets provide a way for you to export your backup phrase - usually in .txt format - to protect yourself from an untimely death or disability (and any other reason that prevents you from accessing your wallet). Backup phrases should be kept in a separate place from the private key and password: don't store them on devices you might lose or forget. It is recommended that you encrypt your backup phrase using a strong password before storing it digitally. If you're worried about losing access to your funds forever, print multiple copies of both your encrypted backup phrase and the unencrypted private key. Store one copy of each in a safety deposit box at home, keep the other copy with a trusted person such as a family member or friend who lives far away from where you live, and the other copy in an envelope with a heavy object at work. taped under. This will ensure you have multiple backups in case something bad happens to one of them - like if someone breaks into your house and steals a set of backups leaving the others untouched.

 

Get crypto insurance

One way to ensure that you have your assets covered in case of an exchange default is to buy insurance for them. This may sound like an extreme step, but it is important if you have a large amount of money invested in cryptocurrency. Unfortunately, there are no crypto-specific insurance companies yet, so you'll need to do some research on general insurance companies and find one with a history of working with cryptocurrencies. At least in theory, exchanges should cover the loss of their clients to some extent when they fall – but we have already seen at least one instance where this happened unexpectedly, and traditional customer service (and customer service channels) are usually sometimes not present. Of great disturbance.

 

Do not use exchanges as wallets

The exchanges are amazing. They streamline cryptocurrency trading, simplify payments, and make it easy for you to convert crypto to fiat currency. But one thing they don't do is act as banks. Many exchanges do not require users to go through rigorous identity checks; In fact, some just ask for an email address - allowing anyone access to said email address and basic personal details like name and date of birth to convert large amounts of cryptocurrency into other currencies without anyone noticing. lamps. Also, exchanges are not insured or endorsed by anything - even if they tell you otherwise (and many do). If an exchange goes out of business, there is no guarantee that any money will be returned to customers.