There is no better way to protect your crypto investments than with the right wallet.
That’s because a crypto wallet equals “the keys to the kingdom,” says Brent Campbell, founder and CEO of Fort Lauderdale, Florida-based digital asset investment firm NXS Crypto Fund. “I tell clients that a wallet is the first step for anyone who wants to participate in the blockchain ecosystem: its purpose is to save, store and receive [crypto] currencies anywhere in the world, without a bank” .
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top 6 crypto wallets
Technically, not every cryptocurrency investor needs their own wallet, as most major exchanges allow you to store your crypto inside your account, much like a 401(k) or IRA lives inside an account. fidelity or avant-garde. But unlike the traditional stock market, there are no robust federally mandated protections for crypto investors. so as the value of your crypto becomes more significant, you could benefit from the added security that comes with your own wallet.
Depending on your investment strategy, you may want to consider a hot or cold wallet, or a wallet offered by your access exchange. We asked four crypto experts what long-term investors should know. Based on our own research and input from experts, here are six of the best crypto wallets that long-term investors should consider.
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do you need a crypto wallet to hold crypto?
You don’t need a crypto wallet to own crypto, especially if you don’t have too many and are new to exchanges and the crypto world. But if your assets are piling up and you want more security and more control, now might be a good time to find the right wallet. especially if you are confident in your understanding of things like public and private digital keys, and other aspects of cryptographic security.
“the wallet is like a gateway to the world of cryptocurrencies,” says bec jones, CEO and co-founder of clutch wallet for blockchain app developers. “It’s the first product you download and it’s the first thing you need.”
A digital wallet is similar to a physical wallet in some ways, Jones says, but while your physical wallet can hold cash, credit cards, and even photos of loved ones, a digital wallet can hold the paper equivalents. line: cryptocurrencies, nfts and more.
Of course, digital wallets are not made of leather, but strings of code: they are software or an application (sometimes also physical hardware) that is installed on your computer or smartphone. Different crypto wallets have different features, but most have basic functionalities, Jones says, such as exchange and send options, and the ability to make purchases within the wallet. many also allow users to connect debit and credit cards.
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But digital wallets, like physical ones, come in a variety of types. One of the most important distinguishing characteristics refers to custody.
custodial wallets vs. non-custodial wallets
The basic difference between custodial and non-custodial wallets is that the private key of a custodial wallet is held by a custodian or a third party. For example, if you get your wallet through a crypto exchange, it’s likely a custodial wallet, and the exchange likely holds the keys.
A non-custodial wallet is privately owned by its owner, so you own the private key and are fully responsible for control of your assets. Using a non-custodial wallet would be like depositing cash in a vault at home, rather than in a bank. The problem, however, is that you could be locked out of that vault with little hope of recovering your assets, because no third party can help you.
The learning curve for new crypto investors is steep and the stakes are high. For example, you may be putting your investments at risk if you don’t know how to protect your sensitive information, says crypto expert Wendy O.
so if you’re a new crypto investor, wendy o recommends a custodial wallet from an exchange.
cold wallets versus hot wallets
Another critical thing to know is the difference between cold wallets and hot wallets.
the main difference is that active wallets are connected to the internet or store assets in the cloud (i.e. “active”), while cold wallets are not and are often encased in a piece of hardware physical, like a thumb. ride. therefore, a cold wallet is impervious to hacking attempts and provides an almost insurmountable layer of security for its contents, barring the hardware being stolen.
“A cold storage solution is the safest place to store your funds,” says Charlie Brooks, COO and co-founder of Crypto Asset Recovery, and son of Chris.
on the other hand, a cold wallet presents the risk of losing the physical device and all the cryptocurrencies it contains. therefore, there is a trade-off for that added security, which is also why some investors lock their cold wallets in safe deposit boxes or even a home safe.
how to choose a crypto wallet
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When you’re ready to choose, you’ll want to know if a cryptocurrency wallet is custodial or non-custodial, if it’s hot or cold, and what coins or tokens it can hold as well.
You’ll also want to factor in price. You can buy some cryptocurrency wallets directly for a one-time fee, while others charge fees for moving assets in or out.
You could start narrowing down your options by considering whether wallets have been around for a while, Campbell says. “Look how long each wallet has been around. Are they battle tested? he says. and check if a wallet supports the types of crypto you want to buy. “Not all wallets have the ability to buy all tokens,” he says.
Generally, you’ll want to consider these factors to narrow down your selection, taking into account your security preferences and your trading or investment activity:
- custodial vs. noncustodial
- storage type: hot vs. cold
- amount of coins and tokens supported
- purchase cost or fees
how to protect your crypto wallet
No matter which wallet you choose, be sure to keep security in mind. You will need to securely store your seed phrase, which is a series of words generated by your wallet that allows you to access your crypto. it is basically a password that the wallet creates for you. so you want to physically write it down and store it in a safe or vault, instead of writing it down on a piece of paper next to your computer, where it can be lost or thrown away, potentially locking up your wallet forever.
“you’re more likely to throw it away if it’s on a post-it,” says charlie brooks.
campbell says he has his seed phrase in a vault and written in two other separate places. he recommends that cryptocurrency investors do the same. “If you lose him, he’s gone,” says Campbell.
after all, your seed phrase is the key to your wallet. “Your wallet is your point of identity,” says Jones. “It’s going to be an essential everyday product for people who interact on the web.”
So, once you’ve chosen your wallet, make sure your seed phrase is protected and easily accessible only by you. “Keeping track of your seed phrase is much more important than choosing the right wallet,” says Chris Brooks.
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