To learn how to store your crypto safely is very important. You ask why?
Consider this: In 2023, over $1 billion worth of cryptocurrency was stolen due to inadequate storage practices. For beginners in crypto, this can be quite unsettling.
However, this blog aims to guide you in safeguarding your cryptocurrencies.
Unlike traditional currency, cryptocurrency losses are nearly impossible to recover once they’re gone. This makes secure storage practices essential.
So, ensuring that you know how to store your crypto safely is one of the most critical steps you can take as a new investor.
In this guide, I will provide you with all the necessary information to keep your crypto secure.
IMPORTANT: I've selected some really great blog posts that I think you'll absolutely love. They're waiting for you right at the bottom of this post. Don't forget to give them a read!Best Ways to Store Your Crypto
In this blog post, I’ll take you through the 3 best ways to store your cryptocurrency. I’ll explain each in detail and share their pros and cons to help you make a better decision.
1. Store Crypto on Exchanges
Crypto exchanges serve as online platforms where users can buy, sell, and store cryptocurrencies. Acting as intermediaries, they facilitate the trading of cryptocurrencies between buyers and sellers.
There are numerous exchanges available, but some of the most prominent and widely used include Binance, Bybit, and Gate.io.
How to Begin
- Account Creation: Visit the official website of your selected exchange. Click the sign-up button and complete the registration form with your email address and a strong password. Verify your email by clicking on the link sent to your inbox.
- Verification: Complete the Know Your Customer (KYC) process, which typically involves submitting a government-issued ID and occasionally a selfie.
- Buying and Storing Crypto: After your account is verified, you can begin buying and storing cryptocurrencies. This can usually be done through bank transfers, credit/debit cards, or by receiving crypto from another wallet or exchange.
Pros and Cons
Pros:
- User-Friendly: Most exchanges are designed to be intuitive and easy to use, making them ideal for beginners.
- High Liquidity: High trading volumes make it easier to buy and sell large amounts of cryptocurrency.
Cons:
- Hacking Risks: Exchanges are prime targets for hackers due to the large amounts of cryptocurrency they hold. If an exchange gets into trouble, your cryptocurrencies could be lost forever.
- Custodial Nature: Users do not have direct control over their private keys, as the exchange holds them on their behalf. This requires trusting the exchange’s security measures.
- Withdrawal Limits: Many exchanges impose daily or monthly limits on how much cryptocurrency you can withdraw.
Read Also: Common Mistakes to Avoid When Using Crypto Exchanges
2. Store Crypto on Mobile Wallets
Mobile wallets are smartphone apps that enable users to store, send, and receive cryptocurrencies directly from their mobile devices. These wallets offer a convenient means of managing your cryptocurrencies while on the move.
Some of the most well-regarded and popular mobile wallets include Trust Wallet, Coinbase Wallet, and Exodus.
Getting Started
- Download and Install: Visit your device’s app store (Google Play Store or Apple App Store). Search for the mobile wallet you prefer, then download and install the app.
- Set Up: Launch the app and follow the setup instructions to create a new wallet. The app will generate a seed phrase (a series of 12-24 words used to recover your wallet). Write this down and keep it in a secure location, as it is crucial for wallet recovery if you lose access to your device.
- Adding Funds: To deposit crypto into your wallet, use the “Receive” feature to generate your wallet address. Share this address with the sender or transfer crypto from an exchange or another wallet.
Pros and Cons
Pros:
- Accessibility: Mobile wallets enable you to manage your cryptocurrencies from anywhere, at any time, using your smartphone.
- User-Friendly: These wallets are designed with intuitive interfaces, making them suitable for beginners.
- User Control: Unlike exchanges, mobile wallets provide control over your private keys, reducing dependence on third parties.
Cons:
- Security Risks: Mobile devices are vulnerable to malware, phishing attacks, and physical theft.
- Device Dependence: If your device is lost, stolen, or damaged, accessing your funds can be impossible unless you have a backup of your seed phrase for recovery.
Read Also: How to Recover a Crypto Wallet: A Beginner’s Guide
3. Store Crypto on Hardware Wallets
Hardware wallets are physical devices specifically crafted to securely store cryptocurrencies offline. They are regarded as the most secure option to store crypto since they are disconnected from the internet, making them immune to hacking attempts.
Two of the most renowned hardware wallets are Ledger and Trezor.
How to Get Started
- Purchase: Acquire a hardware wallet directly from a reputable source, like the official Ledger or Trezor websites. This helps ensure the device hasn’t been tampered with, which can be a risk when buying from third-party sellers.
- Setup: After receiving your hardware wallet, unbox it and connect it to your computer using a USB cable or Bluetooth if supported. Follow the manufacturer’s setup instructions, which typically involve creating a PIN code. The device will then generate a recovery seed (usually a series of 24 words). It is crucial to write this seed down and store it safely, as it is needed to recover your wallet if the device is lost or damaged.
- Transferring Funds: Install the relevant software or browser extension (e.g., Ledger Live for Ledger wallets or Trezor Suite for Trezor wallets) to manage your crypto assets. Use the software to generate receiving addresses and transfer your cryptocurrencies from an exchange or another wallet to your hardware wallet.
Pros and Cons
Pros:
- Superior Security: Hardware wallets provide the highest level of security by keeping private keys offline, away from potential hackers.
- User Control: You maintain full control over your private keys, ensuring that only you can access your funds.
Cons:
- Cost: Hardware wallets can be quite expensive, typically ranging from $50 to $200 or more.
- Complex Setup: The setup process can be complex and time-consuming, especially for beginners.
- Less Convenience: They are less convenient for frequent transactions since the device needs to be connected to a computer or mobile device.
Choosing the Best Crypto Storage Option for You
Now that you know the various ways to store your crypto, let’s look into how to choose the best option for your needs, along with some tips for using these methods safely.
Evaluating Your Needs and Preferences
- Security vs. Convenience:
- If security is your main concern, hardware wallets are the best choice. They provide the highest level of security by keeping your private keys offline.
- If you prioritize convenience, mobile wallets might be more appropriate. They allow easy and on-the-go access to your crypto.
- If you trade frequently, consider using a crypto exchange, but be mindful of the associated risks.
- Frequency of Transactions:
- For those who make frequent transactions, mobile wallets and exchanges offer greater practicality. They allow easier access and faster transaction times.
- For long-term holding, hardware wallets are preferable. They ensure your cryptocurrencies are kept securely offline.
- Technical Comfort:
- Beginners may find exchanges and mobile wallets more user-friendly due to their intuitive interfaces and simple setup processes.
- Users with more technical knowledge might prefer hardware wallets for their advanced security features.
Combining Storage Methods
To bolster security and flexibility, consider integrating a variety of methods:
1. Use Hardware Wallets for Long-term Storage:
Hardware wallets are considered the most secure option for storing large amounts of cryptocurrency. By keeping your private keys offline, these wallets greatly minimize the risk of hacking.
They are ideal for the bulk of your holdings that you don’t need to access regularly.
Best Practices:
- Always purchase hardware wallets from official sources to avoid tampered devices.
- Store your recovery seed phrase in a safe, offline location.
- Regularly update the firmware on your hardware wallet to benefit from the latest security enhancements.
2. Keep Smaller Amounts in Mobile Wallets for Daily Use:
Mobile wallets offer a practical solution for managing cryptocurrencies while on the move. They are ideal for daily transactions, providing the flexibility to access your funds anytime and anywhere.
Nevertheless, it is crucial to ensure your mobile device’s security and to keep your seed phrase safely backed up.
Best Practices:
- Store only small amounts in your mobile wallet for everyday use.
- Regularly back up your seed phrase and keep it in a secure offline location.
- Use a strong password and activate biometric security features if available.
3. Utilize Exchanges for Trading:
Crypto exchanges are well-suited for holding a portion of your cryptocurrencies that you use for frequent trading or require quick access to. Their high liquidity facilitates the swift buying and selling of large cryptocurrency amounts.
Nevertheless, given the risks associated with storing large sums on exchanges, it is advisable to restrict this practice to the funds you are actively trading or might need on short notice.
Recommended Practices:
- Activate two-factor authentication (2FA) on your exchange account.
- Routinely move funds from your exchange to more secure storage solutions.
- Refrain from keeping large amounts of cryptocurrency on exchanges for prolonged periods.
How to Allocate Your Funds
Suggested Allocation:
- Exchanges: 10-20% of your total holdings for active trading and quick access.
- Mobile Wallets: 10-20% for everyday transactions and moderate accessibility.
- Hardware Wallets: 60-80% for long-term storage and maximum security.
Final Tips for Safe Crypto Storage
- Diversify Your Storage:
- Avoid keeping all your crypto in a single type of storage. Distribute it among various options such as exchanges, mobile wallets, and hardware wallets to reduce potential risks.
- Enable Two-Factor Authentication (2FA):
- Enhance the security of your exchange and mobile wallet accounts by enabling 2FA, providing an additional layer of protection.
- Keep Your Software Updated:
- Keep your mobile wallet apps and hardware wallet firmware up to date to safeguard against potential vulnerabilities.
- Use Strong, Unique Passwords:
- Ensure your accounts are secured with strong, unique passwords, and avoid reusing passwords across different platforms.
- Backup Your Recovery Phrases:
- Write your recovery phrases (seed phrases) on paper and store them in multiple secure locations.
- Never share your recovery phrases with anyone.
Additional Resources:
Excited to learn more about Bitcoin and cryptocurrencies? We’ve got some awesome resources below to help you out.
- 7 Best Ways to Secure Your Cryptocurrencies
- 5 Best Crypto Exchanges to Use
- The Best Crypto Hardware Wallets for Storing Crypto Offline
- 7 Best Practices for Crypto Wallet Security
- 5 Best Cryptocurrency Mobile Wallets
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DISCLAIMER:
The information provided here is intended for informational purposes only and should not be solely relied upon for making investment decisions. It does not constitute financial, tax, legal, or accounting advice. Additionally, I strongly recommend that you only invest in cryptocurrency an amount you are comfortable with potentially losing temporarily.