Once you have purchased cryptocurrency, you need to store it safely to protect it from hacks or theft. Usually, cryptocurrency is stored in crypto wallets, which are physical devices or online software used to store the private keys to your cryptocurrencies securely. Some exchanges provide wallet services, making it easy for you to store directly through the platform. However, not all exchanges or brokers automatically provide wallet services for you.
There are different wallet providers to choose from. The terms “hot wallet” and “cold wallet” are used:
– A hot wallet is connected to the internet and can be accessed at any time. It refers to crypto storage that uses online software to protect the private keys to your assets.
– A cold wallet also known as hardware wallets is not connected to the internet and allows to store your funds offline. You can still receive funds at any time, but no-one can transfer them out.
Best practices for storing cryptocurrencies
Here are a few tips to help you store your cryptocurrency safely:
• Store the bulk of your crypto in a cold wallet since that’s the most secure option.
• Use a hot wallet for smaller amounts of crypto that you want available for trading.
• Physically record the recovery phrases for your crypto wallets. You can write them down, and there are also steel tools designed for recording crypto recovery phrases.
• Save recovery phrases in a secure location that only you can access.
• Never share your crypto wallet’s recovery phrase or private keys with anyone, and don’t save them to your computer.
Are cryptocurrencies taxed?
Holding a crypto does not have any tax implications, but the following do:
• Selling of or gifting cryptocurrency
• Trading or exchanging even for other forms of cryptocurrency
• Buying goods or services with cryptocurrency
• Conversion of cryptocurrency to government issued currency
As with any investment, make sure you consider your investment goals and current financial situation before investing in cryptocurrency or individual companies that have a heavy stake in it. Cryptocurrency can be extremely volatile—a single tweet can make its price plummet—and it’s still a very speculative investment. This means you should invest carefully and with caution.
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