Ether has hugely outperformed bitcoin since the two cryptocurrencies bottomed in June 2022. Ether’s higher gains came as investors anticipate a major upgrade to the Ethereum blockchain called “the merger.”
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If all the recent upheaval in the crypto space has you on the verge of selling, there is another option worth exploring. Cold storage can protect your digital assets by taking them offline and hosting your crypto in a digital wallet. Since these digital wallets are not connected to the Internet, they are less susceptible to hacks.
The recent fall of FTX is a prime example of why it pays to keep some or all of your cryptocurrency in cold storage. When your crypto is on an exchange, like FTX, you can only access those assets if the exchange is able to distribute your funds to you. If this exchange is hacked or mismanages funds, your money could be gone.
The downside of cold storage is that your assets are less liquid and harder to trade quickly, as you have to go through various safeguards to access your funds.
If you want to move your crypto to cold storage, here’s how to get started.
Types of cold storage wallets
There are a number of cold storage wallets you can purchase to get started. Not all cold storage wallets support all tokens. Here are some of the most popular options.
Leger has two cold storage wallets on the market: the Ledger Nano S Plus which costs $79 and the more expensive Ledger Nano X.
Depending on the model you get, these devices can be connected to your computer with a USB cable and a compatible iOS or Android mobile device, or with Bluetooth capability.
It supports over 5,500 types of cryptocurrency. It should be noted that Ledger suffered a hack in 2020, during which 1 million email addresses were leaked, but no crypto assets were stolen.
Trezor has an entry-level model that costs $72, as well as the Model T that costs $213.
The $213 cold storage wallet is similar to the Ledger Nano X, except it lacks Bluetooth capability. This is intentional, as some fear that Bluetooth is susceptible to hacking. It is also compatible with web browser, desktop OS and it is supported by Android. However, there is no support for iOS.
Instead of using USB or Bluetooth connections, Ellipal’s Titan Wallet uses QR codes and starts at $119.
This device supports more than 10,000 token types.
How to move your cryptocurrency to cold storage
It is important to buy your cold wallet directly from the manufacturer. The last thing you want to do is end up with a device configured with a known password designed to scam you.
1. Plug your cold storage device into your computer.
2. Download the software that came with your cold storage wallet.
3. You will receive a seed phrase or a backup code. It’s best to keep this code offline and safe, somewhere where it won’t be lost or accessed by others. Write it down on a piece of paper and put it in a safe.
4. Each type of cryptocurrency (like bitcoins, etherealWhere attached) needs its own wallet. Follow the instructions to create a new wallet for each type of crypto you’re trying to store.
5. To access your device, you will need to set up a PIN.
6. Once you have a pin, you will be able to add your crypto to your cold storage wallet by clicking receive, which will show you the address of your cold storage wallet.
7. To withdraw your cryptocurrency from an exchange, log into the exchange and send the digital assets to your cold storage wallet address.
Keep your cold room in a safe place and remember that if you lose it with your seed phrase, your money cannot be recovered. If you lose your hardware wallet, but still have your seed phrase, you can purchase another hardware wallet and access your assets.
It’s a little risky knowing that if you misplace that device with the seed phrase, there’s nothing you can do, but at least you have full custody of your assets, unlike when your digital assets are tied to an exchange.