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How to keep your cryptocurrency safe after the FTX collapse

Sam Bankman-Fried's fraud of misappropriating users' funds have led investors to explore options that can help safeguard their investments.

The fall of the FTX crypto exchange forced many to reconsider their overall approach to investments — starting from self-custody to verifying the on-chain existence of funds. This shift in approach was driven primarily by the lack of trust crypto investors have in the entrepreneurs after being duped by FTX CEO and co-founder Sam Bankman-Fried (SBF).

FTX crashed after SBF and his accomplices were caught secretly reinvesting users' funds, resulting in the misplacement of at least $1 billion of client funds. Efforts to regain investor trust saw competing crypto exchanges proactively flaunting their proof-of-reserves to confirm users' funds' existence. However, community members have since demanded that the exchanges show their liabilities to safeguard the reserves.

With SBF, the self-proclaimed “most generous billionaire,” commiting fraud in broad daylight with no visible legal implications, investors must maintain a defensive stance when it comes to protecting their investments. To safeguard assets from fraud, hacks and misappropriation, investors must take certain measures to keep total control of their assets — often considered as best crypto investment practices.

Move your funds out of the crypto exchanges

Crypto exchanges are widely used to purchase, sell and trade cryptocurrencies in exchange for a small fee. While other methods, including peer-to-peer and direct selling, are always an option, higher exchange liquidity allows investors to match orders and guarantee no loss of funds during the transaction.

The problem arises when investors decide to keep their funds in wallets provided and owned by the exchanges. Unfortunately, this is where most investors learn the lesson “not your keys, not your coins” the hard way. Cryptocurrencies being stored on exchange-provided wallets are ultimately in possession of the owner, which in the case of FTX users, was misused by SBF and associates.

Evading this risk is as simple as moving the funds out of the exchange to a wallet with no shared private keys. Private keys are secure encryptions that allow access to the funds stored in crypto wallets, which can be recovered using a backup phrase in case of misplacement.

Hardware wallet: The safest bet for storing cryptocurrencies

Hardware wallets offer total ownership over the private keys of a crypto wallet, thus limiting the funds' access only to the owner of the hardware wallet. After procuring cryptocurrencies from an exchange, users must voluntarily transfer their assets to a hardware wallet.

Once the transaction is completed, owners of the crypto exchange will no longer be able to access the fund. As a result, investors opting for a hardware wallet will no longer risk losing funds to frauds or hacks happening over the exchanges.

Related: What is a Bitcoin Wallet? A beginner's guide to storing BTC

However, while hardware wallets add to the overall safety of funds, cryptocurrencies remain at risk of impermanent losses when a token’s value goes down unrecoverably. Hardware wallet providers have witnessed a sharp increase in sales as investors slowly move away from storing their assets over exchanges.

Don’t trust, Verify

In all the crypto crashes that happened this year — including 3AC, Terraform Labs, Celsius, Voyager and FTX — breaking of investors’ trust was a common and evident theme. As a result, the motto of ‘Don't Trust, Verify’ has finally resonated with both new and seasoned investors.

Popular crypto exchanges, including Bitfinex, Binance, OKX, Bybit, Huobi and Gate.io, have taken proactive approaches to showcase their proof-of-reserves. The exchanges provided wallet information that allows investors to self-audit the existence of their funds within the exchange.

While proof-of-reserve shares a glimpse into an exchange’s reserves, it fails to provide the complete picture of its finances as information related to liabilities are often not made publicly available. On Nov. 26, Kraken CEO Jesse Powell called out Binance’s proof-of-reserve as “either ignorance or intentional misrepresentation” as the data did not include negative balances.

However, Binance CEO Changpeng Zhao refuted Powell’s claims by stating that the exchange has no negative balances and will be verified in an upcoming audit.

The above three considerations are a good starting point for safeguarding crypto assets against bad actors. Some of the other popular methods to take away control from the crypto entrepreneurs are using decentralized exchanges (DEX), self-custody (non-custodial) wallets and doing extensive research (DYOR) on seemingly investible projects.

Billionaire Mike Novogratz Predicts Bitcoin Will Explode by Over 2,800% – But There’s a Catch

Billionaire Mike Novogratz Predicts Bitcoin Will Explode by Over 2,800% – But There’s a Catch

Billionaire Mike Novogratz Predicts Bitcoin Will Explode by Over 2,800% – But There’s a Catch

Galaxy Digital founder and CEO Mike Novogratz is predicting a meteoric ascent for Bitcoin (BTC) that could push the value of the king crypto to heights never seen before. Reminded that he predicted Bitcoin would reach $500,000 by 2025, Novogratz says in a new Bloomberg interview that he still believes BTC could hit his massive […]

The post Billionaire Mike Novogratz Predicts Bitcoin Will Explode by Over 2,800% – But There’s a Catch appeared first on The Daily Hodl.

How to keep your cryptocurrency safe after the FTX collapse

EU Parliament to ‘Vote on Adopting the Regulation on MiCA’ — Expert Says Industry Needs Legal Clarity

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How to keep your cryptocurrency safe after the FTX collapse

FTX US ex-president reportedly seeks $6M funding to launch crypto startup

The ex-president of FTX US, Brett Harrison, is reportedly planning to launch a start-up that would build crypto trading software for big investors.

Just a month after the controversial fall of Sam Bankman-Fried’s FTX exchange and 130 affiliated companies, a former high-ranking executive is reportedly seeking out investors to launch a crypto startup.

The ex-president of FTX US, Brett Harrison, is on the lookout for $6 million in funding to launch a start-up that would build crypto trading software for big investors, according to The Information. Harrison’s funding round would be against a $60 million valuation.

On Sept. 27, Harrison announced his plans to step down as the president of FTX US as he moved into an advisory role — over a month before the infamous fall of FTX. As a result, the entrepreneur was not immediately accused of having direct involvement in misappropriating users’ funds.

However, after the FTX crash, Harrison, too, claimed to be “surprised and saddened” by what SBF and his accomplices were able to achieve through deception. Following FTX’s crash, a hacker managed to gain access to a part of the the exhange’s funds and has been actively trying to syphon the stolen funds.

Most recently, the FTX hacker was found transfering a portion of stolen funds to OKX after using Bitcoin (BTC) mixer.

Related: FTX Japan drafts plan to return client funds

FTX Japan, one of 134 companies caught up in FTX’s bankruptcy proceedings but has been drafting a plan to return client funds.

On Dec. 1, FTX Japan confirmed that the user assets were seperate from the exchange’s assets, as mandated by Japanese regulations.

Currently, FTX Japan claims its primary focus is to re-enable withdrawals and is reportedly aiming to do so by the end of 2022.

How to keep your cryptocurrency safe after the FTX collapse

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How to keep your cryptocurrency safe after the FTX collapse

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How to keep your cryptocurrency safe after the FTX collapse

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How to keep your cryptocurrency safe after the FTX collapse

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How to keep your cryptocurrency safe after the FTX collapse

Two Under-the-Radar Ethereum-Based Altcoins Surge by More Than 40% This Week

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Two under-the-radar, Ethereum-based (ETH) altcoins are surging this week while much of the crypto market tracks sideways. Mask Network (MASK), a project that aims to bring Web3 features to social media platforms like Twitter and Facebook, is trading at $3.97 at time of writing. The 119th-ranked crypto asset by market cap is up by more […]

The post Two Under-the-Radar Ethereum-Based Altcoins Surge by More Than 40% This Week appeared first on The Daily Hodl.

How to keep your cryptocurrency safe after the FTX collapse

Galaxy Digital To Acquire Crypto Asset Self-Custody Platform GK8 From Collapsed Lender Celsius

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Crypto asset management firm Galaxy Digital is preparing to acquire self-custody platform GK8 from Celsius, a digital asset lender that collapsed earlier this year. According to a new press release, Galaxy Digital is purchasing the Israel-based institutional-grade custody platform as a means of offering self banking services to its customers. Furthermore, Galaxy Digital plans to […]

The post Galaxy Digital To Acquire Crypto Asset Self-Custody Platform GK8 From Collapsed Lender Celsius appeared first on The Daily Hodl.

How to keep your cryptocurrency safe after the FTX collapse