How to Recover Lost Cryptocurrency or Access Your Wallet

It was between 2011 and 2014 that the world as a whole witnessed the first gigantic event of losing cryptocurrencies worth $350 million from Mt. Gox, a crypto heist that sent shivers down the market. 

Ever since this event, crypto enthusiasm faced a huge impact. People and organizations lost trust and moved to peer-to-peer trading platforms. However, the chances of losing cryptocurrencies never went away.  

Losing your cryptocurrencies means losing your private key. The private key is the password to your wallet that helps you access your cryptocurrency funds. Without the private key, your crypto is as good as absent. 

The worrying fact about losing crypto is that in most cases it’s on you when you lose it. After the Mt. Gox incident there was a demand for regulation and the government did act upon it to safeguard digital assets from malicious attacks. But the problem begins when you’re solely responsible for your loss. 

Hence, we’re here. Our guide will help you learn how to recover lost cryptocurrency or cryptocurrency wallet recovery. We’ll also talk about all the different scenarios when you might need that help.  

Common Causes of Lost Cryptocurrency  

Source : ctfassets

We’ll divide this section in three parts. One, when you’re responsible for the loss and two, when a third party is responsible for the loss. And third, ofcourse, when it’s a government regulation.  

When it’s on you 

The first situation is when you lose your private keys or seed phrase due to your own negligence, it is naturally your responsibility. This necessitates securely storing wallet details and back up keys. 

You can also damage the hardware where your wallet is stored due to your own actions and in such cases, you’re solely responsible for the act. 

However, not all hardware damage is physical. There are also chances that you’ve corrupted the hardware due to your actions and now you’ve lost access to your crypto. 

When you can pass the blame 

Now, coming to situations where you can pass the blame, the first is when your cryptocurrency is stolen due to a hack or scam. In such case,s you can have grounds to pursue legal action against the perpetrators, although that doesn’t guarantee recovery of your lost cryptocurrencies. 

If the loss occurred due to a security breach at a cryptocurrency exchange, you can absolutely hold the exchange accountable. Depending on their security measures and terms of service you can raise your hopes of getting back your assets. However, in these cases, if you’ve chosen an unreliable exchange, the fault falls on you as well. 

Also, there is no dearth of phishing scams when it comes to digital assets. When you lose your crypto due to such unfortunate incidents, you can forgive yourself completely but may also forget about your chances of getting back your cryptocurrencies without a good fight. 

When you can blame the Government 

When it comes to blaming the government, in most cases your losses are not so direct, as in, you don’t directly lose any access to your wallet or assets. The loss is monetary and regulatory. 

In case of government regulations you must note that in the U.S., losses from the sale or exchange of crypto are capital losses and are allowed only if the taxpayer has capital gains for the year. 

Moreover, if the crypto you held for investment is stolen, abandoned, or becomes totally worthless, the loss will not be subject to the capital loss limitation rule. 

Another tricky part of this game is when your crypto holdings are rendered worthless. The IRS says that if your cryptocurrency is still being traded on an exchange, even if it’s worth almost nothing, they won’t consider it “worthless.” Because of this, it is difficult to get a tax deduction on worthless crypto ultimately leading to a total loss on that cryptocurrency. 

How to Recover Lost Cryptocurrency 

Source : ctfassets

Now, coming to the recovery stage, there are different types of losing when it comes to cryptocurrencies. You can lose your private key which means you lost access to your wallet. Also, sometimes you may have access to your wallet, but you’ve lost your cryptocurrencies from it. Moreover, there’s also a way you can recover your loss from scams. So, we’ll divide the sections according to the type of loss to help you understand. 

Recovering Crypto Wallets 

Seed Phrase  

If you have a seed phrase (usually 12 or 24 words), you can restore your wallet by entering the phrase correctly into the compatible wallet software. When doing this, you cannot make a typo or change the order of the words in the seed phrase. 

Private Keys  

There are situations when you might not have the seed phrase. In such cases, you can still have access to your crypto wallet by using private keys or pins. Then you must extract the private key and import it into another wallet where you can create a new seed phrase and secure your crypto. 

Recovery Tools  

With some highly-secured wallets you can have alternative methods to ensure pin recovery. They offer encrypted backups, wallet files or multi-signature authorizations to help you keep your keys secured. So, if you’re unable to access your cryptocurrencies, you can follow any of the backup methods, the one offered by your wallet, and get back your private key. 

Ledger Recovery Service  

With ledgers you can get an optional paid service where an encrypted backup of your seed phrase is stored with third-party custodians. To avail this service you will have to do a KYC (identity verification). This process does help you retrieve the funds, however, it comes with its own set of risks such as privacy concerns, vulnerability and even compromises your ownership and control over your own wealth. 

Recovering Cryptocurrencies 

Blockchain Analysis Tools  

To recover your lost cryptocurrencies, you can use tools like CipherTrace, Chainalysis and Elliptic. With these tools you can trace transactions that can reveal all criminal activities thereby helping you to understand the networks and relationships with advanced analytics. Once you’ve identified suspicious activities you can follow the trail of stolen funds by de-anonymizing transactions to finally come to a confrontation with the criminals. 

Data Recovery from Damaged Devices  

If your device is not working correctly due to software issues such as a malicious virus, corrupt operating system, or a rogue app, you can take help from technicians to retrieve data because the hardware where the data is stored is still intact. With the help of specialized software and advanced techniques these individuals can bypass the malfunctioning parts of the system. 

Legal and Regulatory Tools  

If you lose your cryptocurrency and wish to go for legal support to recover your lost crypto coins, the first step is reporting the cryptocurrency scam to your area’s designated law enforcement authorities. If you’re a U.S. citizen, you can report any fraudulent activity involving crypto to the U.S. Securities and Exchange Commission, the Commodity Futures Trading Commission or the Federal Trade Commission 

Collaborate with law enforcement and regulatory bodies and compel the crypto exchange, hot wallet providers or other entities to cooperate to make the process smoother.  

The Role of Wallet Recovery Tools and Services 

If you’re holding crypto assets, you must learn all about wallet recovery tools and services. With them, you have your last but a strong chance to regain access to your lost or inaccessible wallets. As you know these wallets are singular in their importance due to the decnetralized feature of cryptocurrencies. Hence, there’s no running to central authorities when you lose access to your crypto. These privately owned services on the other hand come equipped with the expertise and technology that helps them find a solution or get to the bottom of the case when you lose your assets. However, once you have the information, you can always go running to central authorities and demand justice. 

When you’re going for tools and not services, remember, these are data extraction hardware and software and can retrieve wallet files, private keys, and other critical information from damaged or corrupted devices. 

Companies like Professional Crypto Recovery, ReWallet, Data Recovery, and Keychain specialize in these services that help you recover lost access to your wallets. They have expertise in a wide range of wallets including Armory, MultiBit, Ethereum Presale, Blockchain.com, Electrum, and MyEtherWallet and also your hardware wallets like Trezor, KeepKey, Ledger, and BitBox. Several of these services operate on a success-based fee model, where you only need to pay if the recovery process is successful. Also, some of these services protect your interests through formal legal agreements that help ensure transparency and trust. 

What if Recovery Is Impossible?  

Source : professionalcryptorecovery

Even with the right tools and methods you can face situations where recovering your wallet details or crypto assets can look impossible. What do you do in such situations? 

First thing you must accept that your funds are likely gone forever if a wallet is hacked and you find your funds stolen. In such cases, your chances to recover is next to impossible unless… you can trace the funds. For this you can use the recovery services we just mentioned above. It involves cost and procedures and you need a lot of patience to get through the process.  

If you lose or forget your seed phrase, you’re in serious trouble. There’s no way you can reset or regenerate it. In these situations you must keep your calm and check for notes, photos, or documents where you might have saved the phrase. Also, do not skip the inspection of your encrypted folders, safes, or any other places where you’re more likely to store sensitive information. However, avoid searching internet-connected devices with your wallet details as it only exposes you more and exposes you to the risks of malware attacks or hackers. 

All in all, data recovery services are one of the best solutions you can go for when your wallet keys or transaction details are lost. Hence, consult a professional who can help you drill the drive and recover whatever is lost.  

The Future of Securing your Cryptocurrency and Wallet 

AI as we know have grown to influence, impact and improve every existing field at the moment. Well, the crypto world is no different! AI and machine learning algorithms analyze vast amounts of blockchain data to identify suspicious activities and trace the movement of stolen funds. With this technology you can analyse blockchain transactions to identify theft patterns and the correlating asset recovery processes. Consequently you can learn and understand the crypto ecosystem better to find out new ways of securing our digital assets. 

Also, when we are looking into the future of cryptocurrency we cannot miss out the quantum computing threat that can potentially crack cryptographic algorithms. This got developers scared where experts around the world are trying hard to explore and develop quantum-resistant cryptography such as lattice-based and hash-based schemes that can successfully withstand quantum attacks. 

Alos, looking at the brighter side, we have emerging solutions like the blockchain forensics that aims to investigate and analyze transactions in order to identify illicit activities and trace suspicious funds. 

All in all, we are looking forward to huge shifts in the crypto world with potential increase in both security and threats.