The cryptocurrency realm has been going through a fleet of unforeseen events. Every now and then, one or another catastrophic event causes chaos in the market. Following the unforeseen collapse of Terra in May, the latest event is the fall of FTX.
Millions of users were stranded as they stored their funds on FTX. After declaring bankruptcy, the security of users’ funds is jeopardized. It is now unknown whether the users will receive their funds back. This is one of the issues with storing funds on CEXs. In moments of financial trouble, the safety and security of user funds are also in question.
So what is the best way to store your cryptocurrency? The best way to store your crypto is to ensure that you hold control of your private keys. Let’s take a look at why it’s important to store cryptocurrency in a hot or cold wallet.
Why should you store your crypto in a hot or cold wallet?
The necessity to store your cryptocurrency in a hot or cold wallet arises due to one more reason, more prevalent now than ever. Some of the exchanges, including Coinbase, have recently revealed that in the event of bankruptcy, the exchange is not liable to pay back the assets to the customers.
To ensure that your cryptocurrency stays yours, you can either use a hot or cold wallet. Hot wallets are wallets that allow you to keep cryptocurrency in your possession. Hot wallets are generally connected to the internet and are also more vulnerable to hacks. Some examples include Metamask, which lets users store their crypto with private keys safe in their hands.
Numerous investors decide to store their cryptocurrency on web wallets or online exchanges. People don’t realize that if your wallet is connected to a web wallet and that web wallet is compromised, your money could be stolen.
The cold wallet, on the other hand, is the most secure method of all. A hardware wallet’s main objective is to keep your private keys secret while they are being stored and transferred. This kind of wallet gives you total control over your cryptocurrencies and the highest level of security.
For users who are also hodlers, the best way is to keep your crypto in a cold wallet, like a Trezor or Ledger, and keep it locked up safely.