The cryptocurrency market is something most people have heard about and which has started to generate huge headlines around the world. With a market size of around $1.6bn in 2021, many insiders predict it will grow to around $2.2bn by 2026. This sort of growth coupled with the performance of coins like Bitcoin have made crypto a viable investment opportunity for many.
Before you can begin investing in crypto, though, you must get a handle on how to approach it all. This will give you a better chance of success and help you make sensible trading decisions. Keeping up with the latest crypto prices at OKX is a great example of this and means you always know the latest price action to base your trading calls on.
Another thing to get up to speed with is crypto wallets. But what do newcomers to these wallets need to know about them?
What are crypto wallets?
Just as finding out how to delete Gmail folders is useful for people who use this email service, working out what you need to know about crypto wallets is key for any crypto investor. The best place to start is by getting a basic understanding of what they actually are.
In simple terms, it is perhaps easiest to think of them like a physical wallet, in which you keep your cash or credit cards secure. The purpose of a crypto wallet is essentially the same – to give you a safe, secure place to store the digital coins you own. These wallets are pieces of hardware or software that enable you to store/trade the coins you own via the internet. Wallets like this are accessed via public and private key codes that are known only by the owner of the wallet.
What else should you know about crypto wallets?
Some cryptocurrency wallets will also give an overview of your portfolio via in-built investment dashboards. These kinds of wallet usually come in two options – hot or cold. Hot wallets exist only online and are pieces of specialist software designed for trading digital cash. Cold wallets are physical hardware objects that do the same job. Whatever kind you choose, you need to pick one that is set up to work with the currency you are trading (ie you need a Bitcoin wallet to trade Bitcoin).
Why do people use these for trading digital cash online?
Now we know more about what these wallets are, you might wonder why people use these for investing in cryptocurrencies online. After all, you can technically store your coins with the exchange you use for trading them. While this is true, most crypto investors will choose to use their own private hot or cold wallet.
This is because using your own crypto wallet is often seen as more secure. While the security measures the best exchanges have in place are high-level, hacking is still an ever-present threat for them. Global cybercrime stats for 2021 show how damaging this kind of crime is and most investors therefore feel much safer having their own wallet to use.
In addition, most crypto investors prefer the control and features that using their own crypto wallet brings. Many private wallets, for example, will include extra features that you will not find in custodial wallets offered by exchanges. Private cryptocurrency wallets also enable you to be in total control of your assets and be the only one who has access to them.
How to choose a crypto wallet
Once you have made your mind up to use a crypto wallet for trading digital cash, it is wise to know what to look for. The most obvious thing is deciding which sort you prefer. More active traders who do not want the cost of buying a cold wallet might go with an easy to access hot wallet. On the other hand, people who want a physical wallet they can carry around with them and lock safely away might go with a cold one.
Once you have settled on the sort of wallet you like, it is a case of researching the market to find the particular option you prefer. When doing this, it is important to look into the security if offers, the costs involved, the coins it enables you to trade and how easy it is to use.
Crypto wallets are important to traders
Although you do not technically need your own crypto wallet to store or trade coins on an exchange, most investors will use them. If you are planning to break into this type of trading yourself, getting to grips with what they are all about makes sense.