3 Ways to Reduce Risk in the Crypto Market [2021]

If you asked most people to do a word association on cryptocurrencies and the crypto market in general, throughout the past 10 years the most common to words that would repetitively keep coming up would be opportunity and risk.

The crypto space is known for presenting unique opportunities to be able to generate significantly larger amounts of money then are available almost anywhere else, while at the same time there are levels of risk in the crypto space that supersede risk found almost anywhere else also.

This guide is taking a look at three ways to reduce risk in the cryptocurrency market in 2021, breaking down a few different types of the most common risks that traders, in contact with, and then looking at three ways of dealing with those risks.

Why is Reducing Risk So Important?

Since the earliest days of Bitcoin that have been significant risks to those that bought and sold cryptocurrencies, being that the nature of cryptocurrencies themselves present scammers and hackers with the opportunity to be able to protect themselves.

Because cryptocurrencies in general are either pseudo-anonymous or anonymous in the way that the ownership of them is publicly available, that means that if hackers and scammers successfully target cryptocurrency uses they have a higher chance of being able to get away with their crimes.

This means that it is important to be vigilant but in the cryptocurrency market and to be aware of the situation, and to take the appropriate steps in order to try to mitigate risk as much as possible.

How Has Risk Evolved Over the Last Decade?

Trading Platforms Have Better Security

One of the biggest developments in the cryptocurrency market over the last 10 years has been the rapid development of new technologies that trading platforms have been able to use to secure their own systems and the funds and data of the users.

These developments include new ways of protecting accounts and ensuring safe logins such as 2FA, as well as new mechanisms that prevent hackers from accessing the funds that are stored on the platform including the use of hot and cold wallets.

Although trading platforms now have much better technologies at their disposal, the hackers that are trying to breach the systems are consistently increasing their skills and abilities to penetrate defenses as well and so this has become an ongoing arms race between trading platforms and hackers.

The Expansion of the Market Has Attracted More Scammers

The cryptocurrency market has ballooned over the last decade, and in particular in the last for five years the total number of cryptocurrency uses and the total value of all of the cryptocurrency in the world has increased exponentially.

This has meant that while there are many more uses than they used to be in the cryptocurrency market, there are also many more scammers who have been attracted to the growing opportunities of such a huge number of people with so much value being stored in crypto today.

It's because of the increase in the prevalence of scammers in the cryptocurrency market that it is prudent for traders and investors to be vigilant of the risks that may be involved in buying and selling cryptocurrencies.

More Tools in the Crypto Space to Protect Users

As well as there being more technologies that are available for cryptocurrency platforms to use to protect themselves, there are also more tools available today than ever before for cryptocurrency traders to be able to protect their funds as well.

Perhaps the best example of this Bitcoin is the now ubiquitous use of hardware wallets as the most effective way for traders to protect the funds and keep them away from hackers.

As well as this however, there are many more other tools that can be used by traders and investors in order to secure the cryptocurrency, and as time progresses we expect that to be even more cutting-edge developments in this space as well.

What are the Biggest Risks in the Crypto Market?

Having Your Crypto Stolen by Hackers

Hackers regularly target cryptocurrency users, as do scammers, with there being ever more scams and hacks that occur in the crypto market.

As well as this, the sophistication of the way that scammers and hackers target uses is always increasing as well, with some of the most sophisticated scams and hacks that have been seen in the cryptocurrency space occurring over the past few years.

Because many users in the market are relatively new, they may have a lesser understanding of the risks that are present, and also may have a lack of a technical background to understand how hackers can target them.

Using Scammy Trading Platforms

Another risk that has been prevalent in the cryptocurrency market throughout the time of its operation has been the occurrence of scam trading platforms.

These trading platforms essentially set up to look like other trading platforms and may even provide basic trading to begin with, and then after large enough amounts of cryptocurrencies deposit on them they will exit scan and run off with the user's money.

Therefore it is incredibly important to make sure that you only use trusted crypto trading platforms that have a proven track record for protecting the uses and that are respected within the industry.

Missing Out on Profiting in the 2021 bull run

The third risk which is a little bit different to the first two, is the risk of missing out on the significant opportunities to generate profit in 2021.

Every four years the cryptocurrency market experiences a bull run year, which is where the demand for cryptocurrencies increases exponentially as does the price of the cryptocurrencies.

By missing out on this year's bull run, users will fail to take the opportunity to generate anywhere from 500% profit up to 10,000% profit throughout this year.

What Happens When Things Go Wrong?

On a daily basis there are thousands of traders around the world that engage with the cryptocurrency market and that fall into the trap of being ripped off by scammers or hackers.

Although in some situations users have got back that money as a result of a trading platform paying the back with an insurance fund or some other stroke of good luck, in the vast majority of cases users will never receive the cryptocurrency back.

In order to protect themselves from these kinds of situations, users should always consider the security risks of everything that they do in the market and try to digest as much information about the risks that are present as possible.

3 Ways to Reduce Risk in the Crypto Market

Always Use Hardware Wallets for Large Amounts

One of the best security developments in the cryptocurrency space has been the creation of hardware wallets, with brands such as Trezor and Ledger leading the way for many years.

Hardware wallets are essentially physical devices that can connect to the internet and that can store the private keys of different wallets on them with the only way of being able to get the cryptocurrencies that are stored on the wallet being to have physical access to them.

This creates a powerful security layer for users, and is the reason that consistently hardware wallets are recommended as being the safest way to store large amounts of cryptocurrency.

Use Trusted, Safe, Professional Trading Platforms

One of the most important considerations in the crypto market is to ensure that traders only use safe and reputed crypto trading platforms.

There have been some of the biggest trading platforms in the cryptocurrency market that have been hacked recently, such as Binance being hacked for $50 million in 2019 and KuCoin being hacked in 2020 for $150 million.

Conversely to this, there are trading platforms such as PrimeXBT that have been in the market for a number of years and have built a strong reputation for being safe places for users to trade considering that they have never been hacked.

Some of the cutting-edge security features implemented on PrimeXBT include cold storage of digital assets with multi-signature technology and hardware security modules with rating of FIPS PUB 140-2 Level 3 or higher.

Use Platforms with Many Opportunities

In order to ensure that you do not miss the 2021 bull run, it is important to use trading platforms that provide a range of opportunities for generating profit.

Coming back to the aforementioned PrimeXBT, the platform provides a wide range of opportunities for generating profit such as the ability to access crypto copy trading, the ability to access industry-leading leverage of up to 100X on cryptocurrencies, and the ability to trade a wide range of traditional assets as well.

By using platforms such as these you have traders give themselves an edge over the rest of the market and increase the likelihood of being able to identify and monopolize upon profitable opportunities.

In Conclusion

While there are many risks in the cryptocurrency market and that always will be, those traders and investors which are aware of the risks and take steps to mitigate against them will be much safer than other uses that do not.

By using hardware wallets, using trading platforms that are safe have good reputations, and using trading platforms that provide a wide range of up opportunities in 2020 was bull run, traders and investors will put themselves in the best position possible to generate profit while also putting themselves in a position where they have mitigated risk as much as possible as well.

For more information on the security at PrimeXBT check out PrimeXBT’s security page, for more information about some of the opportunities on PrimeXBT check out PrimeXBT's platform page.