Jun 25, 2018
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Hackers have been staging crypto-heists that have made off with hundreds of millions of dollars in digital currencies. The threat from cyberthieves has hurt the value of bitcoin and its rivals.
If you invest in virtual currencies, you have good reason to be concerned. But there are a few things you can do to protect yourself -- and your profits.
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Here are answers to five questions you might have.
1. Am I at risk?
The attacks are shaking the confidence of virtual currency investors.
The most recent attack was aimed at a South Korean exchange site, Coinrail.
While the underlying blockchain technology that powers digital currencies is very hacker-resistant, the crypto exchanges are vulnerable.
The group of thieves that targeted Coinrail got away with about 30% of its currency. In another recent incident, almost $500 million in cryptocurrency was stolen from the Japanese exchange Coincheck.
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2. Will I lose my investment?
Digital currency investors have to accept the risk of losing money.
The security of your investment depends on many factors. How often you use exchanges is a primary one. Many were set up without adequate security.
If you're worried that you could lose money, well, that's a given. The world of cryptocurrency is a gamble.
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But the recent hacks have caused values to droop. Bitcoin recently has been trading at its lowest level since mid-November of last year.
3. What's being done?
Regulators are getting tougher on virtual currencies and exchanges.
While the exchanges themselves are improving to varying degrees, regulators around the world are cracking down on the industry.
China went as far as trying to ban bitcoin. In the U.S., the Securities and Exchange Commission is requiring exchanges to register with the agency — and is warning traders to avoid platforms that don't comply.
Analysts predict that exchanges that follow the rules and beef up security will be rewarded with more business and bigger profits, forcing other players to get with the program.
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4. How can I protect myself?
You can protect your crypto investments by spreading your money around.
Japan's Coincheck has been reimbursing its users for their hacked losses. But how do investors avoid falling victim to the thieves in the first place?
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One of the easiest ways is by spreading your investments around over several digital coin exchanges.
If you have multiple accounts, then you won't lose everything if one gets hacked.
5. How can I amp up my security?
Be careful of small crypto coins that may be vulnerable to a 51% attack.
Experts say another smart step is to stay away smaller virtual currencies that might be susceptible to what's called a 51% attack.
That's when hackers are able to take control of more than half the computing power behind a cryptocurrency and make off with large amounts of the digital money.
If you want to play it really safe, you might choose to do your crypto-investing through one of the digital coin funds set up by the household-name financial institutions. But you can wind up stung by fees.
Don't forget about securing your phone either. Efani provides military-grade verification, protection against SIM-hacking, and up to $5 million in insurance coverage — all in one phone plan.
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Doug Whiteman was formerly the editor-in-chief of MoneyWise. He has been quoted by The Wall Street Journal, USA Today and CNBC.com and has been interviewed on Fox Business, CBS Radio and the syndicated TV show "First Business."
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