Cybersecurity Threats in the Crypto World: What Investors Need to Know

Even though many people have made a fortune on crypto, many “serious” investors are still skeptical about this trend. The idea of an online asset still makes them uncomfortable in 2023, even though 99% of their money doesn’t exist in a physical form. 

However, these concerns are not always as ridiculous as it sounds. There are some justifiable fears regarding cybersecurity threats in the crypto world. Here’s what these investors should be aware of. 

1. Watch out for malware and ransomware

When talking about security threats, most people immediately think of malware. Why? Well, because they’re around the longest.

  • Creeper programs have existed since 1971
  • Viruses have existed since 1974
  • The first Trojan was made in 1975

In other words, most of these software types existed long before we were born. We were born into the world of computer viruses, and this was one of the first cybersecurity threats we were ever warned about. 

Today, there are more malware types than ever before. Take keyloggers, for example. They are not looking at your monitor but carefully observing your keyboard. So, when you type the password for your crypto wallet or exchange of choice, they’ll note it down. They’ll do the same when you enter your email and password (for two-factor authentication).

For crypto, ransomware is even more dangerous. They can encrypt your files and prevent you from accessing them without obtaining the key (that you can only get if you pay the hacker in question).

With so many threats, you must take all the steps to protect your online activity. 

Keep an antivirus installed, be careful what links you click on, and never download files from sources that you do not trust. For the most part, your system firewall and antivirus (even a free version) will caution you against that. This means that it takes extra effort on your part for you to ignore them. In other words, there’s no excuse for this reckless behavior.

2. Be careful when you buy Ethereum, Bitcoin, and other crypto

Phishing is arguably the biggest threat to the crypto world as we know it. Fake exchanges look incredibly close to legitimate platforms, so an investor needs to keep both eyes open.

You need to be extra cautious when you receive unsolicited links or offers. This doesn’t mean the link you’ve received in the mail is not legit; it just means it’s probably safer to go through the browser than click on the link.

Also, most antivirus software is pretty good at detecting and stopping phishing threats. It’s just that you need to keep them updated. Ideally, you would switch to a premium plan since the protection provided by a free plan might not be sufficient. 

It’s also important to be very selective when buying crypto. In today’s rapidly evolving digital landscape, understanding how blockchain technology works has become increasingly crucial.  So it is the understanding of the most common risks out there. You need to keep these risks in mind when trying to enter the world of crypto investing. Although this technology is improving transparency and trust, some vulnerabilities are often overlooked. For example, it often falls victim to phishing attacks or SIM swaps. There is also always a risk of human mistakes if you overlook some serious red flags.

One of the main reasons you need to be particularly careful when you choose to buy Ethereum or Bitcoin is because these two are the most credible crypto. Therefore, people let their guard down a bit. People are naturally more cautious when buying IPOs or new and obscure tokens. Still, just because Ethereum is significant and already mainstream doesn’t mean there are no threats. 

In other words, when visiting an exchange platform for the first time, make sure that you check if you’re on the right site. Also, check out some reviews and ratings of the site. There are always haters out there, but if the impressions are overwhelmingly negative…

3. Even an exchange is at risk of getting hacked

A problem doesn’t have to come from your end. A major exchange can be hacked. In the past, for instance, Mt. Gox, one of the world’s largest Bitcoin exchanges, was hacked. This led to a loss of over 850,000 Bitcoins. This loss was worth about $460 million; however, you might get a headache if you try calculating this by the 2021 Bitcoin exchange rate. Even today, the loss would be over $23 billion. 

A similar thing happened to Bitfinex in 2016 and Coincheck in 2018. Sure, cybersecurity has drastically improved in the last several years, but hackers just seem always able to keep up. 

The biggest investor problem here is that you can technically do everything right and suffer from this kind of attack. However, this problem exists in almost every field and, so far, doesn’t seem to have a definitive solution. 

As an investor, the best you can do to put your mind at ease is to keep track of the latest updates in the world of cybersecurity. Also, just because there’s a risk that something out of your control may happen, this doesn’t mean that you should disregard personal responsibility. Do all you can to protect your accounts, and hope the platform will do the same. After all, this is what you do with other financial institutions.

4. Ponzi schemes are still present

A Ponzi scheme is a scenario in which the old investors are paid returns from the new investors’ money. While this works well for a while, the problem is that this influx of new investors would have to be infinite for this situation to be sustainable. In other words, a Ponzi token wouldn’t generate any significant profit. Its value would just grow due to the influx of new investors.

An important thing you need to remember is that the scheme’s size doesn’t legitimize it. At one point, FTX seemed too big to fall; however, its model was eerily similar to a classic Ponzi scheme. The worst part is that it wasn’t that impossible to tell. 

Another popular example in the crypto world was BitConnect. The idea was good, and the offer was suspiciously lucrative. So, financially savvy people were suspicious of it initially; however, many people fell for it. 

There are two key things to protect yourself. The first tip lies in increasing your financial literacy (knowing what a Ponzi scheme is a prerequisite to recognizing it). Second, always be skeptical when things sound too good to be true. This is generally a life hack. 

Remember that no matter how hard FTX and BitConnect hit the ground when they fall, the next crypto Ponzi is a certainty, not a likelihood. This doesn’t mean that you should discard all crypto. After all, there was a housing bubble in 2008, and following this logic, there would no longer be any real estate industry. Just keep your eyes open and watch out when things seem too convenient.

5. Insider threats and leaks are always a possibility

Crypto is looking more like a traditional investment world with each passing hour. Unfortunately, this means it mimics the negative sides as often as the positive ones. One of these sides is insider trading.

Many people evaluate whether the platform or company is corrupt based on several factors. But the problem is that this problem can’t really be solved for good. All it takes is for one individual to be corrupt (or even reckless, which we’ll talk about shortly) for much sensitive information to leak. 

Sometimes, this won’t be intentional. With everyone working from home, some people are not very good with their personal cybersecurity. People who work on these crypto projects (crypto development, exchange employees, etc.) risk losing their notes to hackers. In theory, they’re supposed to be much more tech-savvy and aware of these threats, but this won’t be the case 100% of the time. Nothing is.

The only party that can solve this is the platform itself. They can limit access to everyone on a need-to-know basis, regularly check suspicious insider activity, and give it their best during the screening process. With this in place, the system won’t be impenetrable, but it will be as secure as any conventional exchange.

6. Think about regulatory risks

This last factor is not necessarily a regulatory risk, but it’s worth considering. You see, some countries, like China, are banning crypto. Others are heavily regulating them. This is a matter that’s entirely out of your control but to an investor; it could mean a serious problem or a serious opportunity.

On the one hand, losing a major market like China is a devastating blow. At the same time, this doesn’t necessarily mean the end or a downward spiral of the industry as a whole.

It’s impossible to stop the hackers completely, but the overall security level is higher than people assume

If you’re trading crypto, your priority is keeping your devices safe. This means watching out for any type of malware or ransomware. Second, you need to be careful when buying. This applies even to the biggest exchanges and the biggest crypto coins. The risk of phishing is never zero.

Finally, watch out for matters that are out of your control. Insider trading, the risk of the exchange being hacked, and upcoming regulations can be problematic. You may hear it from a mile away if you keep your ear to the ground.