If you can’t see or hold Bitcoin, where do you keep it and how do you secure it? When Bitcoin is purchased, the cryptocurrency is transferred into a digital wallet that you can access to manage your investment and make transfers.
There are many available options for selecting a wallet, each with differing characteristics. We will explain the types of wallets and provide tips for safeguarding your Bitcoin when investing. Remember these tips when setting up your wallet and before making purchases at Bitcoin ATMs.
Types of Bitcoin Wallets
Security and ease of use are the primary considerations when selecting a Bitcoin digital wallet. You can select a custodial or non-custodial hot or cold digital wallet based on your needs. Let’s break down these options to ensure you make the right choice.
Custodial and Non-Custodial Bitcoin Wallets
Bitcoin wallets are categorized as custodial or non-custodial.
Custodial wallets are secured and managed by third parties, as opposed to a non-custodial wallet for which you are solely responsible for your Bitcoin.
New investors typically prefer custodial wallets because they’re easier to use and often provide account recovery options if users forget their login information. Not all third-party providers offer account recovery, so verify this before choosing a wallet if that’s important to you.
Non-custodial wallets aren’t as user-friendly, but seasoned investors often prefer them because they’re more secure. By maintaining complete control of your wallet, you won’t be affected if a third-party host gets hacked, although that doesn’t mean a non-custodial wallet can’t be compromised.
You can further safeguard your investment when choosing between hot and cold Bitcoin wallets.
Hot and Cold Bitcoin Digital Wallets
Custodial and non-custodial hot and cold wallets are available for investors.
Hot wallets are usually accessed via mobile applications or websites and are always connected to the internet.
Cold wallets use USB sticks and other devices to store Bitcoin and remain offline unless owners manually connect them to the internet. Typically, investors only connect cold wallets to the internet when making transfers or paying with Bitcoin.
Pros and Cons
Hot wallets are easier to use since they’re always online, and people usually have them on hand via smartphone applications. Even investors new to the overall experience can instantly connect hot digital wallets to Bitcoin ATMs to receive cryptocurrency.
The ease of use comes at a bit of risk since hackers can exploit vulnerabilities in internet connections to take over hot Bitcoin wallets. This is especially dangerous when using a hot wallet connected to a cryptocurrency exchange. Hackers constantly look for ways to hack into exchanges and seize as much cryptocurrency as possible.
Cold wallets can help you increase your safety by decreasing your risk of being hacked. Unlike hot wallets, cold wallets remain offline unless connected to make a transaction. For instance, you’ll need to connect the cold wallet to the internet to get a QR code or address to use at a Bitcoin ATM. With less time online, cold wallets aren’t nearly as vulnerable to hackers.
However, instead of hackers, the main security concern with cold wallets is losing the device. There have been news reports of investors losing or throwing away cold wallets, and they cannot recover the Bitcoin unless they find the device.
Because there are pros and cons to using different types of Bitcoin wallets, many investors select an assortment of wallets.
Use More Than One Bitcoin Digital Wallet
You only need one Bitcoin wallet to start investing, but using multiple wallets is wise. This method can help prevent losing all of your cryptocurrency if your wallet is lost or hacked, and you’ll also benefit from the features each type of wallet provides.
For ease of use, many people add custodial or non-custodial hot wallets to their smartphones to use at Bitcoin ATMs and transfer the funds to a non-custodial cold wallet when they get home. They may get a second cold wallet to distribute the funds when the investment grows. This method allows investors to plan for a worst-case scenario while growing their cryptocurrency portfolios.
Keep Your Wallet Secure
Security should be a priority, regardless of the type of Bitcoin wallet you use. Keep these security tips in mind when using a Bitcoin digital wallet:
- Vet all links to avoid phishing scams.
- Secure the wallet with a strong password.
- Use a different password for each Bitcoin digital wallet.
- Change the password every three months at a minimum.
- Maintain regular backups of your Bitcoin digital wallet.
- Store the wallet’s seed phrase in a safe place only you can access.
- Only keep small amounts of Bitcoin in a hot wallet.
- Update and secure devices that access the wallet.
- Avoid connecting to public Wi-Fi networks.
- Secure cold wallets in a secure place.
Deposit Cryptocurrency Into Your Bitcoin Digital Wallet with a Bitcoin ATM
Once you have a Bitcoin wallet, you’ll be ready to invest in cryptocurrency. CoinMover’s Bitcoin ATMs work with custodial and non-custodial hot and cold wallets, making it easy to invest. Their Bitcoin ATMs are 100% owned and operated in the United States, giving you quick and reliable customer service at the kiosk, where and when you need it. Search for CoinMover Bitcoin ATMs in your area to make your first investment today.