Main Reasons To Store Coins In A Crypto Cold Wallet

You’ve probably heard of something called a “crypto cold wallet.” But what exactly is it, and why should you think about using one to keep your cryptocurrencies safe?

Reasons To Store Coins In A Crypto Cold Wallet
Reasons To Store Coins In A Crypto Cold Wallet

In this blog post, I’m going to break it down for you in simple terms.

By the end, you’ll not only get why these crypto cold wallets are essential for protecting your cryptocurrencies but also wonder why you haven’t switched to them sooner.

The last thing you want is to leave your coins vulnerable to online threats.

So, stick with me because I’m going to give you the lowdown on why choosing a crypto cold wallet could be the smartest move you make.

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Reasons to Use Crypto Cold Wallet to Store Your Crypto

1. Loss of Control

The primary purpose of cryptocurrency is not making a profit, which is the thing driving most of us into investing in crypto today.

That’s not bad.

But crypto was designed to give you 100 percent control of your money.

You give that away when your crypto is on the exchanges and other wallets where you do not have 100% control of your funds.

It was created to be decentralized and free from any third-party interference.

Crypto was never designed to be like banks, controlled by the government.

But that is not what we see with crypto exchanges complying with regulations and almost being answerable to the government.

Not to talk of what they can do when the government come knocking (as seen with the Russian sanctions)

NOTE; I stand with Ukraine.

But if you do not know yet, crypto exchanges for example, from time to time suspend the withdrawal of funds against the will of their customers.

You cannot take your funds at times like this. It does not matter if you have an emergency or if the market is crashing and you want to make withdrawals.

I have also seen reports where accounts were permanently closed, and funds in some of these accounts were gone forever.

Crypto cold wallets are not like that. They give you 100 percent control of your money that not even the government can seize. 

Something to always remember, if it’s not your key, it’s not your coins.

2. Security Reasons

In September 2020, the crypto exchange KuCoin became a victim of a major hacking attack, with the criminals stealing funds worth $280 million.

In July 2019, the crypto exchange Bitpoint also saw its hot wallet ransacked.

The loss was estimated to be $32 million. However, the company’s crypto cold wallets were not affected at all.

Mt.Gox exchange in 2014 also witnessed a notorious hack that resulted in the theft of more than $660 million of users’ funds.

These are just three among so many.

The internet is full of endless reports of popular crypto hacks.

And it’s not just about the crypto exchanges alone, as hot wallets, in general, are the most vulnerable crypto wallets in the world.

Unlike cold wallets, the other digital wallets store your security keys and codes in their online servers, which are vulnerable to hacker attacks, scamming attempts, and others.

Some of these companies indeed have security measures in place, but all it takes is a minor loophole, and you will lose your crypto.

Crypto Cold Wallets On The Other Hand

They have a reputation for being impenetrable.

Some of these cold wallets are so secure that even if you plug them into a computer that has a virus (a key-logger or any other type of malware) your funds would remain safe.

To tell you how important the crypto cold wallets are, as a measure to minimize risk, the most trusted exchanges store the majority of their funds in a cold wallet just in case when they are hacked.

My question now is; if these big companies knowing their vulnerability can store the majority of their funds in a cold wallet, why are you not doing the same?

Why are you leaving your funds with them?

I must also mention the case of an exchange collapsing or going bankrupt, which happened in 2019 to Quadriga, where 76,000 investors collectively lost over $150 million.

CONCLUSION

I’m sure by now you have concluded that moving your coins into a crypto cold wallet isn’t just a choice, but a necessity.

Not only that it gives you complete control and security over your private keys and encryptions, but it also ensures you aren’t affected by third-party liabilities, making it the safest way to store cryptocurrencies.

I will also clarify that I’m not against storing your funds in crypto exchanges and other crypto wallets.

In fact, I have crypto exchanges I highly recommend that I believe are the best.

If you go ahead and read our post where we explained crypto wallets, you will find our recommended hot wallets there too.

However, for the reasons listed here and many more, I recommended storing a large part of your funds in a crypto cold wallet where it is safe.

Where you have complete control of your money, a place you can withdraw your crypto whenever you want.

For me, the funds in my hot and exchange wallets are the only funds I use for trading and smaller amounts for other transactions.

You should do the same as well, take control of your money and keep it safe.

You can always transfer crypto from your cold wallet back to your hot/exchange wallet when the funds you have there are low.

Downside Of Crypto Cold Wallet

I will not forget to mention that cold wallets come with their challenges.

You can also lose your funds stored in a crypto cold wallet, but only when it is lost or damaged.

The good news is that you can recover all the cryptocurrency in your cold wallet if you still have your recovery seed.

All you’ll need to do is, import the recovery seed into a new hardware wallet, which is easy.

But, if you must store a large amount of your crypto with an exchange or hot wallet, be sure to research the reputation of the company you’re using.

Check also if you will be refunded in case anything happens.

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 Crypto From Being Stolen

Understanding Crypto Wallet: The Best And Safest Wallet

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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.

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