9 Costly Mistakes Crypto Holders Make (And How to Avoid Them)

Crypto offers financial freedom — but that freedom often creates a false sense of security.
Everything may seem under control, until one small misstep leads to irreversible loss.
In 2023 alone, users lost over $1 billion to scams and theft (Chainalysis). As crypto adoption expands, the highest risks often fall on newcomers who are unaware of essential security practices.

These recommendations were compiled by Lucien Bourdon, Bitcoin Analyst and Customer Success Lead at Trezor, based on real user inquiries and loss cases. Below are the most common — and most preventable — mistakes that continue to cost people everything.

1. Thinking "It won’t happen to me"

Many users believe crypto losses happen to others — not to them. But overconfidence is often the first step toward loss.
How to avoid it: Take security seriously from day one. Security is a strategy, not a reaction.

2. Not writing everything down (or relying on memory)

What happens if you forget your recovery phrase or password? In crypto, that can mean permanent loss.
One of the most well-known examples is Stefan Thomas, who lost access to 7,002 BTC (~$240M) due to a forgotten password.
How to avoid it: Secure your recovery phrase offline in a safe location. Testing the recovery process in advance is highly recommended.

3. Using hot wallets for long-term storage

Hot wallets are convenient for daily transactions, but their constant internet connection makes them vulnerable to phishing, malware, and browser-based attacks.

In 2025, the StilachiRAT malware compromised popular browser wallets like MetaMask and Trust Wallet.

How to avoid it: For long-term storage, it’s safer to use dedicated hardware wallets that operate independently from browsers and internet connectivity.
Devices like Trezor store private keys fully offline, ensuring they remain under the user's sole control and are not accessible to exchanges, cloud platforms, or the device manufacturer.
Some models include hardware-based protection features such as the EAL 6+ Secure Element, which strengthens physical security and keeps sensitive data isolated within the device.
Users can manage their assets through Trezor Suite, a local application that enables storing, buying, and swapping cryptocurrencies without relying on third-party platforms or external registration.
Trezor devices also offer practical features such as touchscreen transaction confirmations, open-source code, and support for thousands of coins and tokens, aiming to make secure self-custody more accessible.

4. Trusting cloud storage for seed phrases

Storing your recovery phrase in a cloud document or photo might seem convenient — but it's a known attack vector.
Several high-profile breaches have stemmed from compromised email inboxes, notes apps, or cloud drives.
How to avoid it: Recovery data should be stored physically offline, ideally on a durable medium that can resist water, fire, and time.

5. Losing coins to phishing and fake apps

Phishing remains one of the most effective methods of stealing crypto.
Scammers now use fake websites, cloned apps, impersonated support staff, Telegram bots, and even legitimate-looking emails.
For instance, the PoisonSeed campaign tricked users into revealing recovery phrases through forged forms posing as official services.
How to avoid it: Always verify the source of any app or message. No legitimate support team will ask for your recovery phrase. Urgency is a common red flag.

6. Trusting someone else with your crypto

Delegating control of your funds to a third party is essentially surrendering custody.
In 2025, over $1.4 billion was stolen from Bybit during a cold-to-hot wallet transfer vulnerability.
How to avoid it: Keep your assets in self-custody. Exchanges are best used for trading — not storage.

7. Making security overly complex

Going too far with protective setups can backfire if you can't remember how to access your own funds.
A Reddit user nearly lost 43 BTC after encrypting a file with a password so complex that even he couldn't recall it.
How to avoid it: Your security system should be reliable but also repeatable — even under stress or after time passes.

8. Neglecting an inheritance or emergency plan

If you're the only person who can access your funds, they may be lost forever in an emergency.
Without clear instructions or shared access to recovery data, your crypto can be lost forever after unexpected events.
Solutions include writing clear access guides for trusted individuals, using multi-signature wallets, and integrating crypto recovery into traditional wills or estate plans.
The CEO of QuadrigaCX died with sole access to $215 million in crypto — the funds were never recovered.
How to avoid it: Have a contingency plan in place. Access should be secure and private, but not impossible.

9. Sending crypto to the wrong address

Crypto transactions are final — there's no "undo" button.
Scammers use tactics like address poisoning, where malicious addresses resembling your own appear in transaction history or your clipboard.
How to avoid it: Avoid copying addresses from history. Always verify manually and consider sending a small test transaction first.

Conclusion

Even one overlooked detail can lead to complete loss of funds — but each of these mistakes is entirely avoidable.
As adoption continues, user education will matter just as much as technology.
Self-custody is becoming easier and safer — but the ultimate responsibility still lies with the holder.
Start small: secure your recovery phrase, use a hardware wallet for savings, and double-check every transaction.
In crypto, good habits are your strongest security.

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