Not all crypto investors technically need their own wallet, since most mainstream exchanges allow you to store your crypto within your account, much like how a 401(k) or IRA lives within a Fidelity or Vanguard account. But unlike the traditional stock market, there aren’t robust federally mandated protections in place for crypto investors. So as the value of your crypto becomes more significant, you could benefit from the added security that comes with your own wallet.
Depending on your investment strategy, you might consider a hot or a cold wallet, or a wallet offered by your go-to exchange. We asked four crypto experts what long-term investors should know. Based on our own research and input from the experts, here are six of the best crypto wallets long-term investors should consider.
What Is a Crypto Wallet?
Cryptocurrency exists as nothing more than a string of code on a larger blockchain. When you purchase a crypto, such as Bitcoin or Ethereum, your proof of ownership is based on a public key and a private key.
The public key is like your bank account number: It tells you where your crypto is, but it doesn’t provide access to it. The private key identifies you as the “true owner.”
If you lose the private key, you could lose access to your crypto. Likewise, any person who gets ahold of your private keys has full access to your crypto.
There’s a popular expression in the crypto world, “Not your keys, not your coins.” If you don’t control your keys, you don’t have full access to your crypto assets.
This article contains:
- 6 Best Hot Wallets of October 2023
- What Is a Hot Wallet?
- What’s a Cold Wallet?
- How to Choose a Crypto Wallet？
- How to Protect Your Crypto Wallet？
6 Best Hot Wallets of October 2022
Coinbase Wallet — Best Crypto Wallet for Beginners
Coinbase, which went public in April, is the best known cryptocurrency exchange in the US. The company makes it easy to trade well-known cryptocurrencies from bitcoin to dogecoin, and has its own Visa-backed debit card that integrates with Apple Pay and Google.
If you’re new to cryptocurrency, the Coinbase Wallet is a good place to start. It can be downloaded as an app for Android or iOS, the interface is intuitive and the wallet is fully integrated with the company’s exchange, which makes it easy to conduct transactions — including purchasing coins and tokens with traditional currency.
Unlike the company’s exchange, the Coinbase Wallet is noncustodial; that means that only you have access to your wallet’s private key, which is generated with a 12-word recovery phrase when you sign up. Note that there’s a difference between storing your cryptocurrency on Coinbase’s exchange, which is custodial, and the wallet, which is not. But the integration between them makes it fairly simple to transfer funds back and forth.
Electrum — Best Bitcoin Wallet
If you are primarily a bitcoin investor, you might consider a special wallet that was designed to work with bitcoin in mind.
As such, Electrum may be good for you, as it’s easy to use and has been around for more than a decade — something very few other wallets can claim. Because of its focus on bitcoin and only bitcoin, Electrum is worth checking out if you’re shopping for a bitcoin wallet.
Electrum has been around for more than a decade now, and was built specifically to work with the bitcoin blockchain, which gives it some speed and security advantages. For example, users can easily connect with the bitcoin blockchain via Electrum’s Simple Payment Verification. Electrum can basically dance around the Bitcoin blockchain more efficiently than other wallets because it was built specifically for that purpose.
The drawbacks are that it may not be as beginner-friendly, and the biggest downside is that it only works with BTC, so if you want to store other cryptos, this isn’t for you.
Exodus — Best Crypto Wallet for Altcoins
“Altcoin” is the catch-all term for any cryptocurrency that isn’t bitcoin, and there are thousands of altcoins out there. As such, a good crypto wallet for safely storing altcoins is one that supports many of them, and allows for easy trading and purchasing.
Exodus supports more than 180 different types of cryptocurrencies, and you can transact from within the wallet, without going to an outside exchange. While Exodus may support fewer coins than some other wallets, you’ll get the convenience of keeping all your crypto in one place while plugging into multiple different exchanges. Plus you can connect directly to other users through the wallet’s built-in exchange. That said, it’s a bit more advanced than Coinbase, but Exodus has an edge if you would benefit from the options to navigate more coins and exchanges more freely.
You can also choose between a desktop, mobile, or hardware wallet, depending on your security preferences. The hardware option is a Trezor wallet integration, meaning a Trezor wallet with an Exodus hot wallet running on it.
Trezor Model T — Best Crypto Wallet for Security
If security is your primary concern, experts agree a cold storage hardware device can’t be beat. “For somebody who wants to take no security risks, move [your assets] to a hardware device,” says Campbell, who adds that he has some assets on a hardware device and locked in a bank vault.
Trezor is among the best cold wallet options, says Charlie Brooks, Chris’ son and CPO and co-founder of Crypto Asset Recovery LLC. “A cold storage solution is the safest place to hold your funds.”
A physical hardware wallet from Trezor, such as the Trezor Model T, is a solid choice for the security-minded crypto investor, experts say. At $280, it’s not cheap. However, the Model T has numerous features that make it a standout, such as a large, full-color touchscreen display, and add-ons like Shamir Backup, a Trezor-designed security standard only available for the Model T. The Shamir backup lets you create 16 recovery phrases to use as backups. The security standard also offers protection if your wallet is stolen or destroyed by allowing you to recover the entire thing using a recovery seed.
Along with Ledger wallets, Trezor products are going to be very secure, albeit in a few slightly different ways, so it probably comes down to a user’s preference. The Model T is physically more robust and tough, at least in appearance, which some people might also like. Plus it’s user-friendly, intuitive, and easy to set up.
Custodial Wallets vs. Noncustodial Wallets
The basic difference between custodial and noncustodial wallets is that a custodial wallet’s private key is held by a custodian, or a third-party. For example, if you get your wallet through a crypto exchange, it’s likely a custodial wallet, and the exchange likely holds the keys.
A noncustodial wallet is privately held by its owner, so you hold the private key and are fully responsible for control of your assets. Using a noncustodial wallet would be like depositing cash in a vault at your home, rather than at a bank. The issue, however, is that you could lock yourself out of that vault with little hope of retrieving your assets, because no third party can help you.
The learning curve for new crypto investors is steep, and the stakes are high. For example, you may potentially risk your investments if you don’t know how to protect your sensitive information, says crypto expert Wendy O.
So if you’re a new crypto investor, Wendy O recommends a custodial wallet from an exchange.
Ledger Nano X — Best Cold Wallet That Costs Less
As we’ve covered, cold wallets are the best for keeping crypto assets secure, since they’re not connected to the internet at all times and as such face much less risk of hacking. And hardware devices like the Trezor Model T can go a long way in ensuring your holdings remain safe. But you can find cold wallets that won’t break the bank. We think the Ledger Nano X is the best cold wallet for investors on a budget.
The Ledger Nano X supports thousands of coins and is more affordable than the Trezor Model T. The experts mentioned Ledger wallets along with Trezor as being the best for securing holdings. While the Ledger Nano S costs less, the Nano X’s extra features and the fact that it doesn’t need to be plugged in, because it has Bluetooth, put it over the top. The Nano X supports a lot of tokens and coins, and up to 100 apps. It’s a good choice if you’re an active investor with interest in a bunch of different cryptos.
In terms of security, the Nano X’s most notable feature is its Secure Element security chip, which is similar to what is used to secure credit cards. The chips have been certified by the Common Criteria EAL5+ process.
MetaMask — Best Hot Wallet for Ethereum and Web3 Compatibility
A cold wallet can be an asset if you’re looking to buy and hold. But if you want to trade your crypto, having a hot wallet is a must, as it’ll make it much easier and faster to transact. With that in mind, MetaMask has become a favorite of crypto traders because it opens up new avenues into the Web3 world, too.
MetaMask is also the best hot wallet for ethereum. “MetaMask operates on the ethereum blockchain, the biggest blockchain, which can talk to [NFT exchange] OpenSea,” says Campbell. “MetaMask gives you the most access to the blockchain.”
MetaMask can connect to multiple ethereum-based blockchain networks (such as Binance), NFTs, and all ethereum-based tokens. It’s a popular, easy-to-use wallet that can work with anything built on ethereum, which is a good percentage of the Web3 world. Combined, these factors give it an edge over competing wallets.
It’s also easy for “Web2” users to bridge the gap to Web3, as the mobile app can be downloaded to both iOS and Android smartphones, or you can use the web extension for most major browsers.
You can store NFTs and other collectibles on it, use it in conjunction with a hardware wallet (like Trezor or Ledger), and use it to exchange or buy tokens/cryptos. So if you’re looking to explore NFTs and the metaverse, MetaMask can be a solid choice.
What Is a Hot Wallet?
“Hot” wallets can be desktop, mobile or web-based applications, requiring an internet connection. The connectivity to the web makes these types of wallets more accessible. But it comes with a trade-off: security. Online wallets are more susceptible to hacks.
What’s a Cold Wallet?
Generally, A more secure type of wallet is a “cold” wallet. These hardware wallets come in several shapes and sizes, and they can be a USB stick that connects to the web or a device that scans a QR code, linking to a software application.
Hardware wallets help keep your private keys safe from hackers who would need to steal the physical wallet to gain access and usually involve a PIN as an extra layer of security.
You can typically purchase a hardware wallet for between $50 and $150, although there are some higher-priced options, too.
How to Choose a Crypto Wallet?
When you’re ready to choose, you’ll want to know whether a crypto wallet is custodial or noncustodial, whether it’s hot or cold, and what coins or tokens it can hold, too.
You’ll also want to keep the price in mind. You can purchase some cryptocurrency wallets outright for a one-time fee, while others charge fees for moving assets in or out.
You could start winnowing down your choices by considering whether wallets have been on the market for a while, says Campbell. “Look at how long each wallet has been around. Are they battle-tested?” he says. And check if a wallet supports the types of crypto you want to purchase. “Not every wallet has the capacity to buy every token,” he says.
Generally, you’ll want to consider these factors to narrow down your selection, taking into account your security preferences and trading/investing activity:
- Custodial vs. noncustodial (self-custody)
- Storage type: Hot vs. cold
- Number of supported coins and tokens
- Purchase cost or fees
How to Protect Your Crypto Wallet
No matter which wallet you choose, be sure to keep security top of mind. You’ll need to safely store your seed phrase, which is a series of words generated by your wallet that allows you to access your crypto. It’s basically a password the wallet makes for you. So you want to physically write it down and store it in a safe or vault, as opposed to jotting it on a piece of scrap paper next to your computer, where it can be lost or discarded, potentially locking you out of your wallet forever.
“It’s more likely that you’ll throw it away if it’s on a Post-It note,” says Charlie Brooks.
Campbell says that he has his seed phrase in a vault, and written down in two other separate locations. He recommends crypto investors do the same. “If you lose it, it’s gone,” Campbell says.
After all, your seed phrase is the key to your wallet. “Your wallet is your identity point,” says Jones. “It’s going to be a fundamental, daily-use product for people interacting on the web.”
So once you’ve chosen your wallet, make sure your seed phrase is protected and easily accessible to only you. “Keeping track of your seed phrase is much more important than choosing the right wallet,” says Chris Brooks.