08 Jun

Crypto Wallets on Crypto Exchanges: Explained

We’ve separated our list into the best hot wallets and the best cold wallets to further aid your search. NerdWallet did an in-depth examination of the storage options available on the best cryptocurrency exchanges we have reviewed. Among the factors we considered were insurance against the loss of crypto assets, the costs of using a platform, prior data security incidents and rewards offered by the different platforms. These exchanges are listed below, and the star ratings represent the provider’s overall score.

storing crypto in exchange vs wallet

The wallet has a built-in Web3 browser, allowing users to access dApps and blockchain games directly through the app. This feature makes buying NFTs easy, as users can look, purchase and store tokens using the incorporated decentralized exchange, all without leaving the app. The Coinbase wallet may be used without opening an account with the exchange and it’s non-custodial, meaning the private key is stored in your device — not in Coinbase’s servers. This means you don’t need to worry about your currencies being locked for any reason or exposed to a cyberattack on the website. It’s important to make a distinction between the Coinbase exchange and the Coinbase wallet.

Best for Mobile: Trust Wallet

For security, Crypto.com DeFi Wallet’s features entail two-factor authentications (2FA), password encryption and biometric authentication. Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. Cold storage system Ledger had its user data compromised in July 2020, although no user funds were stolen. He also wrote the USA’s most-saved article of 2021, according to Pocket.

  • It’s also a relatively cheap hardware solution, with a device costing about $50.
  • If you lose your private key, you could lose your funds permanently.
  • Wallets store private keys securely, while exchanges facilitate buying, selling, and trading.
  • Your private key, which is an encrypted code, is like the locked safe to your crypto that keeps it secure.

When choosing one of these products, you might find some with Bluetooth or other wireless options. These are also relatively safe if you can disable the connectivity after using them if they don’t automatically do so. When you purchase a crypto, such as bitcoin or Ethereum, your ownership boils down to a public key and a private key.

What factors should I consider when choosing a crypto wallet or exchange?

However, the wallet you use stores your private key, and wallets are generally software on a hardware device, which makes it hackable—thus, the weak link lies between the blockchain and the user. If you store your cryptocurrencies on a noncustodial cold wallet, you are protected if the crypto wallet company goes bankrupt. You still possess the keys and can transfer your cryptocurrencies to another wallet.

storing crypto in exchange vs wallet

When it comes to wallet vs exchange storage, the exchange controls the coin and basically promises that you own a share of the exchange’s assets. Anything that impacts the exchange—hacks, network problems or finance issues, like when OKCoin was broken into—also impacts your funds and your ability to use them. Nonetheless, many exchanges implement security measures like two-factor authentication, withdrawal whitelists, and insurance against theft. That said, the old adage of “not your keys, not your coins” holds true. To keep your funds safe, it’s best to move your cryptocurrencies off the exchange and into a secure wallet unless you are actively trading. When someone sends you cryptocurrencies, they are signing off ownership of the coins to your wallet address.

Why Do You Need a Crypto Wallet?

Centralized exchanges comply with the appropriate regulatory authorities in their jurisdiction and need licenses to operate. Decentralized exchanges, on the other hand, don’t rely on any centralized bank or authority. When you store your Bitcoin with Coinbase, Coinbase holds onto your Bitcoin for you and gives you access to it. And, while banks are heavily regulated in the US and other countries, it’s important to remember that Bitcoin exchanges are not subject to all the same regulations. A Bitcoin exchange is a website or service that lets you convert “fiat currency” like US dollars and Euros to Bitcoin.

storing crypto in exchange vs wallet

Are you planning to hold your cryptocurrency for the long term, or are you an active trader? If you’re a long-term holder, a crypto wallet may be a better option as it offers higher security and control over your funds. If you’re an active trader, an exchange may be more convenient as it provides easy access to trading and liquidity. Exchanges also provide their users with wallets for different cryptocurrencies. An exchange could also be thought of as a digital bank where people can store their crypto and access certain financial services. It provides a way to engage with a blockchain network and prove that you have ownership of specific digital assets.


A cryptocurrency exchange is a platform where you can buy, sell, and trade various cryptocurrencies. These crypto exchanges will store your crypto for you unless you decide to withdraw it. For example, you can buy Bitcoin with US dollars on Forms Of Crm Software a crypto exchange, and you can keep your Bitcoin on that exchange. You could also convert some of your Bitcoin to another cryptocurrency, like Ethereum, or you could eventually withdraw it to an external wallet or convert it back to USD.

storing crypto in exchange vs wallet

If you forget your account’s password, you can go through an account recovery process. Discover the top choices for a business bank account for cryptocurrencies. The standardized performance presented herein has been calculated by MoneyMade based on data obtained from the third-party platform hosting the investment and is subject to change. No representation or warranty is made as to the reasonableness of the methodology used to calculate such performance. Changes in the methodology used may have a material impact on the returns presented.

If the exchange’s security is breached, users may lose their assets. When a user decides to trade, they transfer their crypto assets into their exchange wallet. These assets are managed by the exchange, which acts as a custodian, maintaining balances, facilitating transactions, and allowing users to buy, sell, or trade crypto assets. The exchange also handles all transaction verifications and security. Are you looking for a platform that is easy to use and convenient? If you prioritize convenience and ease of use, an exchange may be a better choice as it offers a user-friendly interface and customer support.

storing crypto in exchange vs wallet

Of course, anyone who acquired the piece of paper would have the ability to spend your Bitcoin. Crypto wallets are software or special physical devices which you can use to store your crypto assets. A wallet based on a software program is called a hot wallet, and a wallet that is a separate physical device is called a cold one.

While crypto exchanges host hot wallets as well, these typically contain crypto needed to handle daily withdrawals. With exchange crypto wallets structured in this way, were a hack to occur, only the hot wallets would be vulnerable, with the majority of funds safe in cold storage. Reputable crypto exchanges have extensive security measures in place and some even insure millions of dollars of cryptocurrency against potential losses caused by hacks.

Gemini Crypto Wallet

Coinbase Wallet Web3 only supports bitcoin in its mobile app, for example. The Exodus crypto wallet supports more than 100,000 cryptocurrencies. For those new to crypto, Exodus offers a plethora of educational materials and explanatory videos to enhance your knowledge of specific cryptos.

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