The high volatility and uncertainties surrounding cryptocurrencies make them inherent to myriad risks. Further the increasingly high growth in terms of the value of cryptocurrencies has increased their level of vulnerability to thieves and hackers. Since cryptocurrencies are decentralized and thus not regulated by governments or frameworks, they are more susceptible to criminals. In essence, cryptocurrency risks range from liquidity, valuation, legal and regulatory challenges, including inadequate data to draw actionable insights.
Risk management in cryptocurrency has more to do with the ability to identify and manage both the financial and security-related risks. The high illiquidity associated with cryptocurrency fuels the characteristically high price volatilities. As such, it is imperative for individuals, as well as businesses venturing into cryptocurrency to be aware of the need for the implementation of security controls in order to avert the myriad associated risks.
However, as cryptocurrency investments and trading continues to gain traction, it is important to consider the following risk aversion controls and techniques.
Part 1 – Cryptocurrency Platform/Coins
1 Select a reputable cryptocurrency exchange
2 Avoid cryptocurrency platforms that are marred by insecurities
3 Determine the appropriate crypto custody solution for your business
4 Assess the potential risks
5 Go with coins with higher market caps
Part 2 – Implementing Security Controls
6 Look out for fake websites and fake Google ads to protect your crypto from phishing
7 Implement two-factor authentication to enhance cybersecurity
8 Always opt for a more secure storage system such as cold wallets
9 Create and secure your private keys
10 Implement a secure backup for your private keys
11 Be aware of the pump and dump cryptocurrency scams
12 Implement appropriate controls for private keys’ creation, backup, and storage
13 Always invest in renowned cryptocurrencies to avoid rug pull scams
14 Be familiar with commonly used scamming approaches by thieves, hackers, and scammers
15 Test the functionalities of the implemented controls
16 Check that the implemented controls enforce availability, confidentiality, integrity
Notes:
- When implementing risk controls for your business, always ensure that only authorized employees have access and can authorize any cryptocurrency transactions
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