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Choosing a cryptocurrency wallet is the most important decision when you are investing in digital currency. This resource will contain your crypto coins and keep them safe from theft. A cryptocurrency wallet also enables you to receive, send or exchange digital currency so it is your primary management tool. There are many types of cryptocurrency wallets available today and each is perfect for a specific purpose. Some can hold only one type of crypto coin while others can contain many types. Here is how to choose a cryptocurrency wallet today!
Steps to pick the right type of cryptocurrency wallet for you
There are many types of cryptocurrency wallets and each type is suitable for a specific situation. You should pick the one that is most suitable for your personal cryptocurrency needs. Digital coin wallets can be organized into the following categories:
Hot
A hot cryptocurrency wallet is provided online so it is constantly connected to the Internet. Hot wallets enable convenient management because all you need to do is get online, log in, and manipulate your cryptocurrency. Hot wallets are also connected to other services such as email and social media for the delivery of notifications. Due to their characteristics, hot wallets make it very easy to perform crypto coin transfers.
Hot wallets are at a very high risk of being hacked remotely because they are situated online. Thankfully, they empower you to implement security measures such as two-factor authentication and multi-signature execution during asset transfer. Hot wallets are best used for holding small amounts of digital coins and they provide quick access to one’s assets. They are most applicable for beginner crypto enthusiasts or cryptocurrency traders.
Cold
A cold cryptocurrency wallet is offline and has no connection with the Internet. Such a wallet can exist in a computer that has no connection to the Web. It can also be a dedicated piece of hardware or specially printed paper. A cold cryptocurrency wallet is very secure and can be expensive. It is also challenging to manipulate and has no dependency on a third party. This type of cryptocurrency wallet is most applicable for experienced traders or long-term investors.
Self-custody
In the world of cryptocurrency, custody refers to the ownership of your private keys and digital coins. Private keys are special codes that are used to approve digital coin transactions. If you choose a wallet that enables you to hold your own private keys and digital coins, it qualifies as a self-custody wallet.
This type of wallet prevents unwanted people from gaining access to your crypto coins and places the full responsibility of security upon you. A good example of self-custody is keeping all your cryptocurrency in a personal USB drive. A self-custody wallet is most ideal for experienced cryptocurrency holders, traders or investors.
Third-party custody
A third-party custody wallet is managed by an intermediary or external party who you must consult whenever you want to deposit, spend or invest your cryptocurrency because they hold your private keys. This can take time and is sure to inconvenience a cryptocurrency trader.
With a third-party custody wallet, the intermediary can allow multiple people to access your digital currency for example if you opt to join an investment group. This increases the risk of asset manipulation or loss so avoid hot, third-party custody cryptocurrency wallets completely.
The importance of having a cryptocurrency wallet
It is the center of operations
The process of investing in cryptocurrency invoives numerous individual activities working together. Firstly, you need to acquire a crypto coin wallet and create a profile to prove ownership. Secondly, you can buy some coins from an exchange or an individual and then store them in your wallet.
Having done that, you can start trading your digital currency or invest your holdings in a venture such as coin staking. Alternatively, you may hold them until their value increases and then sell at a profit. Lastly, you could liquidate them back into fiat currency.
Through all these activities, your cryptocurrency wallet acts as a central location for storing or manipulating digital coins. For this reason, you need to acquire the best crypto coin wallet for your intended purpose so that these activities can proceed successfully.
It secures your cryptocurrency
Security is an important aspect in the cryptocurrency industry because there are always hackers who want to steal people’s digital coins. Your wallet is a vault holding these assets and must exhibit a high degree of security through end to end encryption, security certificates, two-factor authentication and alerts about account activity.
Avoid hot, third-party custody wallets for example those provided in exchanges because they expose your investment to a high level of risk. Such wallets are never secure as proven by the high profile Cryptopia and Binance hacks that were performed in 2019. That year, traders and investors holding hot, third-party custody wallets lost approximately $4 billion dollars to hackers and scammers. For the best security, use a cold, self-custody wallet.
Access to exotic investment opportunities
Cryptocurrencies offer exotic investment opportunities that were not available earlier such as coin staking, trading them, arbitrage, riding ICO waves and forking. These opportunities require you to have a functioning digital coin wallet. With this resource, you can manage your digital coins by directing them to the investment you desire. It should be secure, flexible, and capable of delivering progress notifications through email or text message. As a matter of fact, there are cryptocurrency wallets that support the integration of trading or investment plugins. By offering these features, a digital coin wallet plays a major role in cryptocurrency investment.
Overall
It is important to have a cryptocurrency wallet before interacting with digital currencies. It is essential to pick the right digital coin wallet so that you can enjoy convenience, security, and flexibility. We have shared some tips above on how to choose the correct crypto coin wallet and why it is important to pick wisely. With the right cryptocurrency wallet, you can confidently explore this new financial frontier!
