Trust Signals: a brief background
Cryptocurrency trust signals are recommendations made by experts, algorithms, artificial intelligence, or a combination of the three that inform investors when to buy, sell, or hold cryptocurrency.
There are multiple trust signals that promise 20, or even 30% higher returns compared to manually trading or assessing cryptocurrency movements. In multiple accounts, they are measured by their historical returns vis-a-vis their accessibility to a broader audience.
These take the shape of Telegram updates, Discord access, and other means of quick communication. They are backed by research and expert insights. Most of them are audited or have undergone risk management assessments.
The 4% statistic: a gap in comprehensive measures?
The key problem highlighted is that although these trust signals are audited or have undergone risk management assessments, the comprehensiveness—that is, the mix of all safeguards mentioned above—are lacking. According to research data obtained from Hacken, while 55% of trust signals are monitored for bug bounties, 26% are audited, and 9% are monitored by third parties; only 4% of trust signals combine all three safety measures.
Due to this, clients have begun asking more questions about the controls in place to verify the solidity of these trust signals, as over 650 million dollars stolen in cryptocurrency in the quarter have been attributed to compromised systems. This demand for tighter controls extends to institutional firms that trade and deal in cryptocurrencies—Moody, a key ratings agency in the United States, had stated that firms evolved to looking at security through the lens of operational resilience. That is, where in the past firms have had looser requirements; the losses sustained above mark a shift towards the preference for more stringent trust signals.
Underlying this problem is looking at trust signals merely through the lens of historical returns. Therefore, with the looming—and worsening—problem of security breaches and lack of integrity, it beckons firms, individuals, and all investors to scrutinize with a mindset of ensuring proper measures. With only 4% of trust signals combining all three measures, the question remains: will there be a shift on the end of trust signals? Currently, the data does not support this point. However, the sustained losses could indicate otherwise in the future.
