From mainstream crypto like Bitcoin, to lesser-known coins like Shiba, cryptocurrencies have become a valuable and highly sought-after asset for many eager investors, artists, collectors, and more.
Whether you are a beginner-lever crypto investor or a seasoned pro, it’s crucial to properly manage your digital assets and tokens. For beginners, this could mean investing in your first hardware wallet – for experts, it may be time to consider formal asset management.
Regardless of where you are in your crypto investment journey, effective management of your assets is essential for both flexibility of use and security. In this article, we will discuss how to properly manage your crypto from beginner to expert level.
Managing Crypto for Beginners
When you’re just starting out with investing in crypto, you’re likely to use a major platform – such as Coinbase – to help you easily manage and view your assets. While platform-based exchanges can be highly useful and educational for beginners, it is important to understand the risks that come with not using a real wallet.
The main difference between wallets and exchanges is that an exchange manages your currency and assets for you and enables advanced seamless functionality like converting tangible currencies (USD, EUR, etc.) into cryptocurrencies, while wallets allow you to store the keys needed to maintain ownership over your crypto. In other words, in exchanges/platforms, someone else is managing your crypto for you (custodial). In your own wallet (non custodial), you truly own your crypto.
Take Coinbase as an example – there is the basic Coinbase platform that serves as a crypto brokerage, and there is also a separate service called Coinbase Wallet – a self-custody wallet that allows you to store your keys on your own device rather than within the exchange. Coinbase has decided to release a non-custodial option to compete with the likes of Exodus, Metamask, Rainbow, and more.
There are More Options Beyond a Computer-Based Wallet: Why it May be Worth Investing in a Hardware Wallet
As you further your cryptocurrency portfolio, choosing the right type of wallet is essential.
Hardware wallets are generally considered one of the most secure options for your cryptocurrency. With a hardware wallet, you use a physical piece of hardware to store your cryptocurrency keys. The main advantage of a hardware wallet is that they’re specifically designed for holding the keys on a piece of hardware, never allowing a computer to gain access to them. Hardware Wallets also allow you to sign cryptocurrency transactions directly (but only if the hardware key is in hand).
While there can be high upfront costs associated with hardware wallets, if you plan on investing seriously (and long-term) in cryptocurrencies, these wallets are one of your best options for ensuring the security of your crypto.
Managing Crypto for Experts
As you gain experience and grow your portfolio in the cryptocurrency space, you may quickly become overwhelmed by the many different exchanges and wallets available to you.
Along with owning multiple hardware wallets, crypto experts are likely to also own multiple:
- Custodial Wallets (Web Wallets): A custodial wallet is a type of crypto storage where the control of your keys is handled by a third party. Most of these come in the form of a hot wallet, a type of wallet that is online-based and stores your assets within the cloud.
- Mobile Wallets: Mobile wallets can be both cloud or software-based and serve as a digital storage space for your crypto and digital asset keys on a specific mobile device. Mobile wallets can come in many forms, both custodial and non-custodial.
- Desktop Wallets: Desktop wallets are often considered one of the most secure forms of digital wallets. These wallets are pieces of software installed onto a desktop or laptop computer, completely locally, that provide the owner with control over their wallet and asset management.
What is Crypto Asset Management?
The more cryptocurrency assets and wallets you obtain, the harder it can be to keep track of your highly valuable private keys. As such, many cryptocurrency experts opt for third-party services and asset management providers once they expand their portfolios significantly.
Cryptocurrency asset management is similar to traditional asset management, except it deals exclusively with tokenized assets traded and stored through blockchain technology.
Providers of this type of asset management may offer a wide range of services: from backup wallets to secure your keys in the event you lose access to your digital wallets, to physical storage spaces to keep your hardware wallets safe. There are purpose-built solutions for securing currencies like Argent for tokens and Casa for Bitcoin. Both come with vault solutions; and the subscriptions can become expensive. Other solutions are actual asset managers and wealth managers, which can include companies like Amber Group, OSL, and others.
While cryptocurrency asset management can be pricey – depending on the provider, products, or services you choose – having reliable asset management you can trust is essential as you grow your portfolio.
As you take the steps to invest in cryptocurrencies, you should think of your crypto accounts the same way you would traditional checking and savings accounts. You want to protect your savings account and keep your wealth secured while minimizing the amount that flows through your checking; but still maintaining enough liquidity to keep it active and useful. It’s imperative that crypto owners are able to adopt a range of solutions to keep themselves protected and diversified; we thought through these challenges when building our protection products at Webacy – always use multiple solutions and try not to rely on just one.
By investing in hardware wallets along with digital ones – and eventually in crypto asset management solutions once you have grown your portfolio – you can ensure the safety of your digital assets long-term.