Crypto Users Turned to Self-Custody by Choosing Hardware Wallets for Their Digital Assets  

2022 was a difficult year for crypto users, as the FTX collapse led to unfavorable consequences for both customers and companies. The liquidity crisis meant billions of dollars lost, increasing volatility levels and negative investor sentiments. Fortunately, the crypto market slowly regains trust and stability, so if you want to know how to buy Ethereum on Binance, you only need to be wary of the wallet type you choose to store your ether. That’s because, besides the major losses, the FTX situation changed how users view security and safety.

Users can usually choose between three main types of wallets: paper, hardware and software. Regarding security features, each provides different solutions and has certain limitations. Still, hardware wallets seem to be the preferred choice now, and clients perceive them as the safest ―let’s see why.


Why are crypto users turning to hardware wallets?

The problem with holding your coins on exchanges regards the custody in the company’s hands. This is also known as a custodial wallet or a hosted one and has benefits and drawbacks. For example, an exchange business has a more user-friendly and convenient interface than decentralized solutions.

However, centralization is an issue that the crypto sector must reduce. This is why many customers were affected by the FTX collapse last year. If the centralized point got involved, the users using it to hold their assets had no choice but to watch the consequences unveiled as they don’t have access to their private keys.

On the other hand, hardware wallets allow users to store the private key offline, protecting it from hacking. You can use a small USB-like device to control your cryptocurrency balance and plug it into a device to transact money.

What other types of wallets are available?

Besides hardware and exchange-based wallets, software ones were also popular due to their high accessibility. They’re similar to what exchanges use because you store your private key on your app or website. Also called hot wallets, these software solutions are easy to access through a browser or app, making your assets vulnerable to cybersecurity threats.

Cold storage, of hardware-based ones, sometimes can include paper documentation, which can be better than most wallets sometimes, but the paper’s fragility makes it easy to lose the private key if not stored somewhere 100% safe.

Why are hardware wallets better?

Hardware wallets don’t depend on an internet connection, and this is the most significant advantage because networks are always prone to be hacked. Plus, you can connect or disconnect your hardware anytime, which is why this choice is preferable since it provides flexibility. 

Besides, here are other benefits of using a hardware wallet:

  • It is highly compatible with multiple cryptocurrencies, and they allow connections with different wallet interfaces to help users fund DeFi and NFT platforms;
  • It is the perfect choice for long-term investors that own large amounts of cryptocurrencies because they don’t have to worry about the security of their assets;
  • It provides multiple recovery options in case the private key gets lost or damaged, such as generating a random unique key to access the account;

Still, a hardware wallet has its drawbacks. For example, they might be more expensive than other options. At the same time, they might be more challenging to use than software-based wallets, which might be difficult for beginner investors.

How to choose the best hardware wallet for your needs?

Before investing, you must decide on choosing a certain type of wallet. As hardware ones are the safest at the moment, here are the aspects you need to consider when looking for the best wallet:

  • The security features it provides: check if the program offers PIN codes, passphrase protection and certain types of authentication. The devices must ensure advanced encryption for a higher level of protection;
  • The cryptocurrencies it accepts. While most hardware wallets accept multiple types of coins, not all include a broader array of cryptocurrencies. And no, Bitcoin and Ethereum are not enough for building a stable portfolio;
  • The backup and recovery options it offers. Considering that devices can get lost or damaged more often than you think, it’s best to rest assured that the hardware solution has your back and provides enough ways to recover your assets;

The most important thing when choosing a hardware wallet is avoiding secondhand devices. Although it may seem like a good idea if you’re on a budget, an already used device may have been tampered with, resulting in losing your assets.

What are other ways to protect your crypto assets from volatility spikes?

Of course, choosing a safe and secure wallet is the first and most important step in taking care of your assets. However, there are many aspects of security in the crypto market, and you need to secure your digital valuables by adopting multiple other strategies. Market volatility will never disappear, so you must learn to diversify your assets. This means investing in more than one or two cryptocurrencies and choosing the ones that seem the most “stable.”

You should choose cryptocurrencies that have been on the market for a while and gained popularity and investors’ trust, such as Bitcoin or Ethereum, which passed multiple bearish and bullish markets. Still, they might have higher fees, and mining requires a lot of computational power so you may consider other options. You can organize your investments in two ways: by type of token and type of sector. For example, you can invest in payment, security, utility, and governance coins. Or, you can shift your focus towards crypto in healthcare, supply chain, transportation and entertainment. Either way, this is the best way to diversify your assets and keep them safe and secure.

Bottom line

As the FTX affected millions of users, investors turned to hardware wallets to self-custody their financials and minimize risks related to cryptocurrencies. At the moment, hardware wallets are the most secure option, but many others provide diverse features that are easy to use, so you should choose the one that fits your needs.