In this article, we’ll outline tips for staying safe and not getting rekt in crypto markets. We’ll focus on cryptocurrency traders and the perils they may encounter. Be sure to read through to the end for a great summary by a security expert!
Every crypto enthusiast has no doubt run into or at least heard about a crypto scam of some kind. Because of the nascency of the market, bad actors often take advantage. They may be targeting newcomers to crypto who are looking for information on how to trade. Or they might try to exploit some vulnerability within the new technology a project is working to build out.
The risks of coming up against a scam run deep, as most industry experts can tell you. While many of the cryptocurrency projects you support are certainly on the up and up, the truth is, they are often the sweetest targets for hackers and scammers.
Arming yourself with knowledge and the right tools will go along way in helping you avoid these scams. After all, you entered the market to enjoy profitability and be part of an global economic revolution. Your goals setting out were certainly not to fall victim to a scam and get rekt in the process.
“Get Rekt” Definition
The term ‘rekt’ originated in gaming and refers to a slang version of ‘wrecked’. While in the gaming world it means getting beaten badly by an opponent during a game, in cryptocurrency, it’s evolved to take on a new meaning.
Getting rekt in crypto refers to complete financial loss. This could mean investing your savings in a shitcoin and losing everything. It could also mean just taking a big hit in the cryptocurrency markets. Alternatively, it may mean you bought in during an all-time high (ATH) and have little to zero chances of ever seeing your money again.
Getting rekt can take on various forms. For instance, you can get rekt by making an uninformed investment choice, or you might get scammed.
The added risk for crypto-traders
Simply put, traders are more exposed. That’s because, unlike the average HODLer, they are exposing themselves to:
- More projects
- Multiple exchanges & wallets
- Most likely, more social media influencers
Let’s take a look at each of these potential danger zones and talk about tips for staying safe:
Various cryptocurrency trading projects are all building never-before-seen, unproven products. The industry is still very new and these trailblazers are working with new technologies.
Additionally, there are scammers that are impersonating many of these projects by creating fake websites or fake groups. They draw in followers who think they are getting into a legit project – only to discover they’ve been bilked or their information has been stolen.
The crypto safety tips below will help you navigate these shark-infested waters more safely.
How to tell if a crypto project is legit
Understand that the cryptocurrency industry is inherently risky because we are swimming in untested waters, sometimes with sharks. Proceed with caution with each cryptocurrency project you approach. Here are a few ways to be proactive in your research:
- Study the team behind the project as well as their previous crypto endeavors. Look at the founders’ LinkedIn profiles to see if they have recommendations from other notable industry players, as well as relevant experience. Who is the CTO or Lead Developer and what is their past work history? What can you learn from the social media channels of these executives and engineers? While this may only give you a cursory glance at a project’s team, it’s just common sense to try and get comfortable with the team of a platform you might potentially be trusting with your information and cryptocurrency.
- Be very cautious with social media groups posing as the “official channel” of a particular project. Before entering any Telegram or other platform group, check on the original website. There, you will find links to all their official social media channels, usually at the bottom of the homepage. These are the only sites endorsed by the real project. Special note: Telegram channel admins will never DM you first, but scammers may try to clone the legit admins, reach out to community members and ask them to send cryptocurrency. Admins will never do this.
Each exchange has its own system of securing crypto assets. Some exchanges custody your private keys in their own cold (or hot) storage. In this case, they are holding your cryptocurrency, so it is they you must trust to secure your assets. *Update: Some decentralized exchanges and token swap wallets are providing a self custody option for traders who want to maintain control over their private keys. Web3 browser wallets such as MetaMask, allow users to maintain their private keys and activating the wallet through a browser only when they are actively using a crypto platform.
When you trade on a traditional exchange, there’s a system of government controlled oversight and regulations that protect investors. Not so much with some crypto exchanges. Many of these policies are being developed. Moreover, because some exchanges are holding the crypto assets of many traders, they are often targets for hackers seeking to drink from the honey pot.
Take these tips into consideration before you engage in cryptocurrency trading on exchanges:
Staying safe on crypto exchanges
Beware of phishing attempts
Basically, phishing means to lure you in using deceptive techniques. A phishing scam might send emails out mimicking an established exchange that is holding a promotion or sale. They then direct victims to a fake site (which looks just like the original site, except the URL is different). There, the user puts in their username and password thinking it’s the legit exchange.
That’s how scammers get your login information to a real exchange and what puts you in danger of getting rekt! Be sure the URL of the exchange is correct and has the security certificate in the URL (https/ vs http/). Always get your verify you have the correct links by checking the official website and Twitter handle.
Keep only the money you plan to actively trade on the exchange
It might seem easy to just keep your stash in one place. But don’t let that place be an exchange (See hard wallets, below). In 2019 alone, there was a big exchange hack almost every month. These were not just happening on obscure exchanges, but also on more established projects like Binance. While Binance has a fund to ‘insure’ against hacks and keep their users’ funds SAFU, not all exchanges do this.
Diversify your crypto wallets
Just as diversification is important in investment management, it’s also a technique used when storing crypto. Many people are comfortable holding crypto on exchanges, but the reality is some have been hacked. Not too long ago, Nano Ledger’s hard wallet company experienced a massive data hack, despite it’s loyal followers’ belief that it was as secure as you could get. With new technologies that are evolving and growing rapidly, keeping all your (crypto) eggs in one basket may cause undue risk.
Study exchange ratings from several sources
Many traders rely on CoinMarketCap (CMC) as their go-to source for exchange ratings. This site has historically measured by using volume as the key indicator. Some would argue that the parameters did not accurately reflect the strength of an exchange. In response, CMC updated their exchange rankings to adjust the volume numbers that were being reported by exchanges. Since then, they’ve also added a liquidity factor when rating crypto exchanges.
Another site, CryptoCompare, publishes a detailed exchange report each year using a different benchmarking system. Instead of basing their exchange ratings primarily on volume, they monitor due diligence, market data, and risk.
Referring to both sites as well as others that you might find will help you determine which exchanges are best for you.
Social Media and Influencers
Where do we start? We all know that social media has provided an outlet for every kind of information. It doesn’t matter whether it is true, false, or somewhere in between. Social media platforms such as Twitter, Reddit and Telegram are hotbeds of scammy crypto activities. This is mainly because scammers have easy access to a worldwide market of people entering a new market.
Crytpo Twitter, TikTok, YouTube, etc. are especially dangerous places for new crypto traders. You’ll find scores of ‘experts’ offering trading advice, often leading newcomers to their paid groups. There are also very many high quality content creators on these platforms. But on social media, there is no real way to verify the information that is given out. In theory, it’s just as easy to delete a price prediction as it is to post one.
Telegram is another outlet often used by scammers who create fake ‘official’ accounts and stage phony airdrops or referral programs, for instance. They lure newbies into giving over confidential information. A common theme is requiring someone to pay a certain amount in crypto to join a fake group, with promises that they will earn 10x their returns! They use very deceptive techniques.
Besides these types of scams, there are fraudsters who impersonate legitimate traders and influencers. Social media is a dangerous place when it comes to trade information. And yet that’s where newcomers to crypto come first when looking to join the cryptocurrency revolution.
Tips for not getting rekt via social media
- When you’re in a Telegram or other social media group, just remember that an admin would never reach out to you or DM you making the first contact. They are there to field questions, guide people, and moderate if necessary. Also, they will not message you asking for your personal information. So if that’s happening, be suspicious.
- Be a skeptic when it comes to news stories that are trending on social media. As is often the case, days later the news story is retracted or remains unverified. Many times these new pieces are spread primarily to hype a coin as part of a pump and dump scheme. This is always bad for newer traders who feel the FOMO and want to join in unwittingly during the pump. If you see an interesting story about a crypto coin, go to the source. Check out their website, look at the Twitter feed of their founder(s), and whenever possible, verify the information at reputable sources.
- Look out for fake profiles. People like Vitalik Buterin are classic examples of influencers who’s profiles get copied by scammers trying to reel in novices. Look for the blue checkmark on Twitter, but even then don’t be totally convinced. Look carefully at their feed. Does it make sense that Buterin has 53 followers? Probably not. Are his tweets not a fit for what you’d expect from one of crypto’s greatest minds? If the answer is yes, it’s most likely a scammer looking to draw in followers and eventually ask them for crypto.
A special word about leverage trading
Many crypto enthusiasts hear from traders and influencers about how they’re making huge profits with leverage trading. But the truth of the matter is that, according to crypto influencer Mr. Kristof, those who are earning the most, earn when other traders are liquidated. Meaning they just lost everything.
If you are leverage trading, for example, you might have anything from a 10:1 to a 100:1 margin, depending on the exchange and the amount you put in. That means for every dollar you put in, you can borrow 10x or 100x more to invest along with your original dollar. Traders leverage to potentially earn greater returns when both buying and selling cryptocurrencies. It essentially gives you more buying power, more to work with.
It’s great if the market moves in your favor and you 10x or 100x your returns. But leverage trading also increase the chances of catastrophic losses. Additionally, we all know how volatile the crypto market is and on top of that, leverage trading is very complex. If the market moves against you, the losses can be enormous and far above and beyond the money you put in.
Just remember that the people making money on crypto leverage trading are pros who are profiting primarily when others lose big through their affiliate links. The main message here is that when you win with leverage trading, your gains pay off the loan. When you lose with leverage trading, you lose your capital and owe according to the margin ratio.
Anatomy of a crypto scam
It’s easier to understand something when you have an example. We can describe in text what a scam might look like. But it’s better to have a firm grip on how a scam actually operates to give you that point of reference. We’d like to share with you our experience of a scammer who posed as HedgeTrade.
Recently, we discovered a Telegram scam project that was posing as the “Official Hedge Group.” They used our logo and website information to appear legit. Over 1500 people had joined the group. Each one was required to recruit 8 referrals to participate in an upcoming airdrop.
To join the ‘official’ group, people had to submit an email address and sign up to a bot with HedgeTrade’s name on it. Whenever anyone asked a question in the group feed, they were told to follow the bot’s instructions.
Once the referrals were in, people were then guided to send ETH to help pay for exchange listing fees. That way, their newly airdropped HEDG tokens would have more liquidity and more value. Unfortunately, the scammer never intended to give away any tokens in the first place. But they were more than happy to accept your Ether.
Needless to say, the fake group grew quickly with its referral program and efficient bot. Quite a clever and complex hoax, and seemingly legit to outsiders. It’s no wonder that many people fell victim to it.
How to shut down a Telegram scam
People may tell you that it’s useless to try and stop a Telegram scam because they are so insidious and Telegram is very low key about any type of censorship. But we gave it a try and it worked. Here’s how we handled it:
- We reported it in the Telegram app as a scam/spam.
- Then we contacted Telegram through the app sending additional information, i.e. screenshots and our email address.
- When we didn’t see immediate results, we tweeted – We had initially reported the group through the app and contacted Telegram on a Friday. By Monday, the group was still going strong, with 500+ new group members! So we tweeted it out with screenshots and alert messages, @ing the official Telegram Twitter channel. That seemed to do the trick. The group was labeled “scam” at the top of the group page almost immediately. Within an hour, it was taken down.
General tips for staying safe in crypto and not getting rekt!
You’ve learned some strategies for keeping safe when using crypto projects, trading on exchanges, and using social media for information. Now let’s take a look at some best practices for managing your crypto assets and making things difficult for scammers and hackers.
Securing your crypto assets – hard wallets and paper wallets
As we mentioned in the exchange section, storing your crypto on exchanges is not a good idea. Exchanges get hacked pretty regularly and systems are not always in place to ensure your coins are safe. Consider storing your crypto private keys offline in a paper or hard wallet, like Ledger Nano or Trezor. This is considered cold storage, as opposed to “hot” storage that includes exchanges and online wallets.
Alternatively, you can store your private keys on paper that is stored safely. When you want to do some trading on an exchange, you can move your crypto online for that purpose by using your private keys.
Knowing what you can afford to lose is the first step in determining the level of risk you should take on when trading. A good benchmark is to never spend more than 1% of your working capital on one trade.
Diversification is also key, as you don’t want all your eggs in one basket. Managing your risk on social trading platforms includes techniques like setting up stop losses to ensure you don’t lose everything, and the more general rule of sticking by the trading plan you have set up.
Avoiding FOMO and not letting emotions get the best of you also go a long way in protecting your crypto assets.
If it sounds too good to be true, it is.
You’ve heard the saying before, and in the crypto world, it is very relevant. If an influencer or self-proclaimed trading wizard is promising everybody 10x returns, walk away. While some seasoned day traders may be experts at finding the best opportunities for quick returns, that’s most likely not you.
Airdrops, ICOs and IEOs
For all three of these hype-creating events, do your own research into the project that is putting it on. All three provide ample opportunities for scammers to operate and you to get rekt. Follow only the instructions from the project’s homepage, and follow them carefully if you are able to participate (US residents are barred from most of them). Double check the that the URL matches the main website.
When participating in a crypto airdrop, you should not have to send money, only your public “receive” address.
As for Initial Exchange Offerings (IEOs), carefully consider the exchange you are sending your crypto to by reviewing the exchange ratings sites discussed above. For both ICOs and IEOs, carefully study the team, the project, and the details of the offering. Make sure the founders have a vesting schedule to keep them engaged long term in the project so they’re not cashing out at the first opportunity.
In addition to your private keys safely, you’ll also need to set up strong passwords to access online crypto sites. A password management application such as LastPass can help by storing them for you. That way you don’t have to remember the passwords.
This is especially helpful when you have multiple wallets. Having one easy password to remember for all of them puts you at more risk. Using different, strong passwords for each makes it harder for hackers.
- Weak password: John123 or 123456789
- Strong password: dj@4jka29%Fa_7mp4$dkSrm2
Most crypto access points now have a 2FA system in place. Normally, there are several choices:
- Using your phone text service as a verification (this method does not protect from SIM swap scams)
- Downloading Google Authenticator on your device
Either way, you’ll get a code that you’ll need (in addition to your password, email, and private keys) to access your cryptocurrency. Google Authenticator may be the better bet, since there have been scammers who engage in SIM swap attacks on cell phones. To do this, they impersonate you to your phone provider by gleaning personal information from your social media accounts and request a new SIM card. Then, the next time you attempt to get into your wallet, they will receive your 2FA code when you request it.
Avoid public Wi-Fii
It’s best not to access your crypto when using public Wi-Fi, as these open networks are notorious for attracting hackers.
Safe strategies from an ethical hacker
Jorge Rodriguez is a white hat hacker who is passionate about ethical hacking. A former Ethereum developer, Jorge is currently a Security Advisor for both the Komodo project and PledgeCamp.
To get a full scope of ways to protect traders from scams and getting rekt, we reached out to Jorge to ask about safe trading strategies for crypto. Below, you’ll find the general best practices as outlined by Jorge:
- Don’t buy coins when the teams are not doing commits in GitHub, as this is a signal that the project has stopped.
- Only use crypto exchanges that have years of work behind them.
- Avoid keeping more than $5000 in an exchange, since we’ve seen that virtually any exchange can get hacked, without exception.
- Enable all methods of security such as 2-factor authorization (2FA) via mobile and email confirmations.
- Don’t ever trade crypto in public places.
- Avoid public mentions on social media as to what cryptocurrencies you are holding and how much you have.
- Always triple check the address when sending crypto. Malware exists that can change the address.
- Only trade on computers that are not used by different users to avoid malware installed inside them.
Make it as hard as possible for scammers and hackers. Because just like a wolf in the wild, they are not going to go after something that will force them to expend a lot of time and energy. They will go after the weakest links simply because that’s the easiest way and requires the least amount of effort.
By reading the above tips and practicing as many safe crypto trading strategies as possible, you can vastly reduce your chances of being that weak link and getting rekt in crypto. Stay safe out there!