With the growth of digital coins and assets in early 2021, new investors are flocking to the market.

If you’re planning on getting into crypto, before you decide which currencies to invest in, you’ll need to set up your crypto wallet. This is where you’ll organize your crypto portfolio. Each wallet comes with a private key that allows you—and only you—to access the wallet’s contents. But setting up your wallet isn’t just about socking away any Bitcoin or Ethereum you may buy on an exchange. It also allows you to send and receive these and other types of cryptocurrencies securely.

Many experienced crypto investors or enthusiasts might know the options. But, it can be difficult for a newcomer to come to grips with the available methods. In an effort to help those who are just starting out in crypto, this guide is going to cover what makes each storage option a good choice.

Hot Wallets

Hot wallets can be quickly and easily accessed online, which makes them quite convenient. Within the overarching “hot wallet” term, there are several different kinds.

They can be downloaded to your computer or phone (software and mobile wallets), or even accessed from any device (in the case of the cloud wallets). 

This makes them very beginner-friendly, as well as simple to understand and use.

Of course, since the wallet is always online and connected, you should take appropriate security measures. Make sure that whatever device you are using is protected. If not, you could run the risk of being hacked.

An Exchange

Another option is to store your coins within the exchange where you can buy, trade, and sell cryptocurrency. Like hot wallets, this involves your crypto being kept online. This is a very convenient method and allows you to manage your funds much easier. So, whether you want to convert your 1 ETH to BTC, or store your crypto assets, an exchange is a popular option.

While it is very convenient, there are some potential security risks. For example, the exchange will have full control over your crypto. This makes your funds more susceptible to theft or fraud. This doesn’t mean that exchanges are not safe. But most investors would agree that using a dedicated wallet is less risky than storing all your crypto money on an exchange.

Cold Wallets

These are wallets that keep cryptocurrency offline. Thus, they are less likely to be the targets of hack attempts. When it comes to cold wallets, there are a few unique options for your crypto. Some wallets store your money and other sensitive data on a piece of hardware like a USB. They can be connected to a computer and may even have an interface, but they don’t have internet access.

A paper wallet, on the other hand, keeps your keys to cryptocurrency on actual paper. Some people will also use engraved metal or laminate their copies. Crypto keys could be written out, or generated by special software, and then printed off. It means that only you will have this information, and it is near impossible for someone to steal it. Of course, you don’t want to lose or damage the paper, as those keys are generally your own way to access your crypto.

While cold wallets are seen as one of the safest options, they are also the least convenient. Because of their offline nature, they are not great for frequent trades as it can be cumbersome to access and unlock them. They make better sense for those who want to hold their cryptocurrency, as opposed to trading often.

Wrapping Up

In closing, cryptocurrency is a secure and exciting new investment class but it’s important to be aware of the risks and scams so that you can avoid becoming a victim of cybercrime. The encryption of cryptocurrency makes it a safe way to buy crypto from an exchange and to transfer crypto coins but keeping copies of your passcode is crucial so that you don’t lock yourself out of your own crypto wallet.