Protecting Your Investments: Best Practices for Storing Cryptocurrency

Introduction

Cryptocurrency is gaining more popularity every year. It’s a legitimate investment vehicle in many countries. However, there’s a specific concern regarding how to store cryptocurrency safely.

As the number of investors keeps going up, so does the number of threats, scams, and risks associated with storing digital tokens.

However, there’s a solution to every problem; and we can secure our cryptocurrency investment if only we knew the best practices of keeping them safe.

If you’re worried about the same, read this article thoroughly. Here, we’ve explored different measures for securing cryptocurrency storage.

Understanding Cryptocurrency Wallets

The key to safeguarding cryptocurrencies lies with the wallets. The type of wallet you use for storing your cryptocurrency directly impacts the level of security you enjoy. And there are two types of wallets that store your cryptocurrency –

Hot wallets.

Cold wallets.

Safekeeping your Cryptocurrencies in Hot Wallets

Hot wallets are a type of cryptocurrency wallet that stores your purchased tokens online, making them readily available for trade.

SO, if you practice regular transactions like crypto arbitrage or daily trading, then it’s the most convenient way to go about.

Although there are several advantages and disadvantages to using a hot wallet for storing all your cryptocurrencies, Explore them below –

Pros	Cons
If we are talking about day-to-day transactions, hot wallets are the best locations for your tokens. In addition to being useful for online transactions hot wallets are extremely useful for their user interface. It has an easy to navigate interface making it easier for fast transactions during daily trade. Hot wallets are easy to set up and aren’t expensive.	Since hot store trips to currency are online, they are extremely vulnerable to fishing attacks and hacking.

Examples: If you want to use hot wallets, then exchange platforms like Coinbase and Binance offer wallets that are built inside the exchange platform, but if you wish to add additional software wallets, then you can go for applications like Exodus or Electron. These applications also provide a balance between security and usefulness.

You’ll find more suggestions on cold wallets on Coinfomania.

Safekeeping your Cryptocurrency in a Cold Wallet

If you’re wondering how to store cryptocurrency safely, then the cold wallet is the best option. Especially if you want to invest in a cryptocurrency and hold it for years, cold wallets are the best.

For example, if you bought Bitcoin worth $100 and want to hold is for a long period, the Cold wallet will help you store the private key. In doing so, it will safeguard your cryptocurrency for the longest period.

Pros	Cons
Cold wallets offer a superior level of security. It keeps the private key in offline storage, making it vulnerable to online attacks and thefts. Yes, cold wallets may be a little expensive, but they work as long-term storage for your cryptocurrencies.	Users will have trouble managing it if they want to run daily trade. There are several steps of authentication to pass before the users can access the private key. That’s why it’s not the ideal storage for daily transactions. The hardware of a cold wallet requires an upfront investment, which is often high.

Aside from the accessibility issue, there’s no major concern about not choosing a cold wallet to store your cryptocurrencies. If you have a cryptocurrency you want to hold for years, try a cold wallet instead of a hot wallet.

Examples: If you have devices such as Ledger Nano S, and Trezor Store the private key offline. Ledger Nano S and Trezor store your private keys offline. There’s also an option to make your paper wallets. You can make a physical printout of the private keys and use them completely offline.

Best Practices for Secure Storage

How do you store cryptocurrency safely? Cold wallets, being the safest option for storing cryptocurrency, are the go-to choice for most investors who want to retain their crypto for a long time. Following are some strategies as to how to save your cryptocurrency in a cold wallet

1. Choose Reputable Exchanges

The best way to ensure that your cryptocurrency is safe and secure, you must ensure strong security measures. Before choosing a wallet, choose a secure cryptocurrency exchange platform. The best ones have some features in common.

First, It has a 2FA: it has an added layer of security requiring second verification from the user. So, there’s hardly a chance of any theft of fraudulent activity. Cold storage solution is the best way to safeguard your crypto.

Apart from the portion you want to trade, keep most of your cryptocurrency holding in a cold storage. It’s best to put the long-term part of your portfolio in the cold storage for compact security.

2. Diversify Storage Methods

Diversify and mix your crypto storage to build risk tolerance for your investment. Put a specific portion of your cryptocurrency in a hot wallet if you want to take part in daily trades.

Let the rest go to the cold wallet as we suggested earlier. Work on this mix and match based on your trading habits. This is the best storage decision you can make without risking too much.

3. Regularly Update Software

You can keep your wallet software and exchange applications up to date is important. Sometimes, it also includes important security patches protecting the assets against newly discovered threats.

This goes for your operating system, antivirus, firewall, and your exchange platform. As long as you keep them secure, your wallet will remain in the safest position.

4. Backup Your Wallet

Keep a backup of your wallet on a regular basis so that you can recover funds when you face a device failure. Or, if you lose your device, you’ll need a backup to help you recover the assets. Here are some tips you can consider –

Make different backups of your wallet data.

Store your backups in safe locations. Offline locations are always the preferable ones.

5. Strong Password and 2FA Authentication

There’s no better security than an unbreakable password safeguarding your private key. Yes, we encourage setting up a strong password system with letters, numbers, and symbols.

Always use a complex combination of numbers, letters, and symbols to create your password. Additionally, ensure that there’s a two-factor authentication encrypting your wallet. SMS-based authentication and Google Authenticator are the best solutions that do not cost money.

Protect Your Private Keys

To find a solution of how to store cryptocurrency safely always make it your priority to protect your private keys. These are the passwords leading to the crypto you have purchased and stored. The best practice would be to never share them with anyone. On top of that, never share PIN or similar seed phrases with others. It helps to have multiple keys for authorizing a transaction to add another layer of security on top.

As long as you are following the steps mentioned above, your cryptocurrency will remain safe. Let us know if this article was helpful or not. Thank you for reading.