Is Cosmos (ATOM) Safe?

Last Updated November 22nd 2021

8 Min Read

How safe is your Cosmos investment? What are the major risks associated with a Cosmos investment, and how can they be avoided?

Well, data from such crypto crime investigative bodies as CipherTrace and regulatory agencies like the Federal Trade Commission (FTC) indicates that Cosmos - like any other crypto - isn’t immune to investment risks.

Actually, not a single investment is - both digital and traditional.

That notwithstanding, crypto crimes and risks to crypto investments have in the recent past received a lot of attention from policymakers and the media. In part, the attention may be related to the fact that crypto investing is a relatively new niche, and the impact of loss associated with such crypto risks is often huge. It also doesn’t help that there is little you or anyone else can do if you lose money to cybercriminals because most crypto investments - unlike bank savings - aren’t insured.

But how risky is Cosmos investing?

Look at it this way, data from CippherTrace indicates that crypto investors lost more than $681 Million between January and July 2021 to crypto theft, fraud, and scams. Earlier, the FTC had reported that in the last quarter of 2020 and the first quarter of 2021, crypto investors in the US reported losses of digital assets worth more than $80 Million to scammers, hackers, and crypto criminals.

The Ciphertrace crypto crime report reveals an emerging trend that should have Cosmos investors worried. It shows that while losses to criminals may have reduced significantly in 2021, cybercriminals have turned their attention to the DeFi niche, which is a key tenet of the larger Cosmos ecosystem. The July report indicated that the DeFi-related fraud accounted for 54% of all losses in 2021, up from 3% in 2020.

So, how do you protect your Cosmos investment?

It is simple, you start by learning of all the risks facing the investment - and how each can be avoided or eliminated altogether. But before we tell you about these risks and how to avoid them, we will look at what you need to know before investing in ATOM.

What To Consider When Buying Cosmos (ATOM)

First, you need to understand that Cosmos, like all other cryptocurrencies, is a high-risk investment that operates in a high-risk industry. This implies that your Cosmos investment is not immune to volatile price fluctuations.

It is not uncommon for the altcoin to gain and lose value by double-digit percentages in a very short period - say a day or even a few hours. This is largely attributable to the fact that most of its value is derived from speculative investor interests that change fast.

Between 1st January and 14th February 2021, for instance, ATOM’s value rallied by more than 400% - from $6 to $25. Later on, between 8th and 23rd May 2021, the altcoin lost more than 65% of its value when its price plummeted from $29 to $9.

It then took Cosmos about 4 months before it could get back to these previous peak prices. Therefore, before you buy ATOM tokens, you need to ask yourself if you can stomach these volatile and unpredictable price fluctuations.

You also need to understand that much of the coin’s price action is largely a reaction to the performance of the larger crypto market, especially Bitcoin. For instance, Cosmos only rose to its May 2021 heights after Bitcoin’s peak above $64,000 in April. Similarly, the current all-time high of $44 set in September was a reaction to Bitcoin’s price that culminated with a new ATH, above $68,000, for the pioneer currency.

It, therefore, is not enough to look at ATOM’s price action when deciding the best time to buy, you have to take into account the price outlook for Bitcoin and the larger crypto industry.

Check Out: What Will Cosmos (ATOM) Be Worth Ιn 10 Years?

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

What Are The Risks Associated With Cosmos (ATOM) Investments?

Price volatility can be described as the most apparent and most common challenge facing ATOM investments. The good thing is that it does not actually lose you money, it only causes unnecessary fluctuations to your investment. If you hold on to the coin long enough, chances are high that it will rise again and help you recover these unrealized losses. You only lose the money invested in Cosmos if you sell your ATOM tokens after a price dip.

Hacking has also become a rather common risk to crypto investing and to Cosmos, by extension. Unlike the loss of money to volatile price action, hacking is more lethal as the loss is permanent. Because of the decentralized and anonymous nature of crypto transactions, there is little you or anyone can do to recover Atom coins lost to hackers.

In most cases, the hacker could target an exchange like in the case of a recent breach of a Japan-based liquid exchange that saw more than $90 million in investor funds lost to hackers in August 2021. They could also target individual crypto wallets like the recent mass hack of Coinbase wallets that saw thousands of users lose millions worth of crypto to cybercriminals.

Lastly, the risk of Cosmos tokens when you forget the wallet’s recovery seed and password is all too common, but it does not get deserved attention. Like the case of hacked coins, there is little hope of ever recovering coins stored in a digital wallet whose recovery seed and password you can’t remember.

Other Types of Scams to Look out for

DeFi rug pulls

This refers to a malicious maneuver by DeFi and other crypto finance projects developers who abandon projects after stealing investor funds. In most cases, they will come with an enticing project that promises above-average returns on investment. But as soon as investors deposit funds into the project, the developers pull down the project and vanish. Some don’t vanish, instead, they leave backdoors to the project’s code and then use it to ‘hack’ the investor funds.

Crypto pump and dump schemes

In modern crypto pump and dump schemes, you have to be most wary of the ‘crypto moon boys’ disguised as expert analysts. These use misinformation to spread fear or incite greed that they could leverage to enrich themselves. The classical case is where they trick the crypto community into believing that a coin has massive potential for growth, sparking a temporary rally but selling all their holdings as soon as the altcoin peaks - leaving everyone else holding the bag.

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How To Keep Your Cosmos (ATOM) Safe?

While we said Cosmos isn’t immune to risk, we never said they are unavoidable - well, save for the volatility that is outside of anyone’s control. Most of the other risks, including hacking, loss of access to a digital wallet, rug pull, and even pump/dump schemes, are avoidable.

Hacks can, for instance, be avoided by storing the private keys for your private keys for you Cosmos tokens offline in a secure hardware wallet. Where possible, do not leave your coins in an exchange because they aren’t insured against such losses. But even more importantly, don’t maintain significant crypto balances in an online crypto wallet.

Loss of access to wallets can be avoided by keeping your copy of recovery seed in a secure environment or by maintaining more than one copy - in case one is ever destroyed/misplaced.

To shield your investments from losses relating to pump and dump schemes, rug pulls, and such other scams as pyramid schemes and fake websites, you only need to conduct due diligence and do your own research when interacting with these platforms and their developers. Do not buy any coin or invest in any DeFi program based on the word of a supposed ‘crypto expert.’ Instead, vet both the platform and the developers thoroughly first.

Cosmos (ATOM) Security Vs Privacy

There is an innumerable number of things that you can do to keep your Cosmos investment secure, but only so much you can do to guarantee the privacy of your Cosmos transactions or personal information.

It starts with understanding that Cosmos security and privacy are two different subjects. Throughout this post, we have discussed Cosmos security and centered it on shielding your ATOM asses from compromise by third parties or attacks by malicious insiders.

Privacy, on the other hand, is restrained to addressing how data is collected, stored, and shared. Cosmos, like all other blockchains, maintains a public ledger that stores all ATOM transaction records and pseudonymous identities of traders and investors in the form of a unique hash code. This means that even though ATOM transactions don’t record your SSN number, name, or any personal information, they can still be traced back to you.

Privacy also extends the Cosmos trading environment to query the amount of personal information collected by blockchain industry players like exchanges and wallet service providers. Privacy also concerns itself with how these entities store this data, who has access to this data, and if/how this personal information is shared with third parties.