Consumers are familiar with the many ways to store fiat currency. You can store this currency in your wallet, a bank account, brokerage platform, and other places. Cryptocurrencies function as assets and currencies, and they aren’t as simple to store. Some cryptocurrency exchanges take care of storage for you, but you will have to know some tech to store crypto. It may feel complicated at first glance, but it gets more straightforward as you learn the process.
Invest In Crypto for Retirement
How is Cryptocurrency Stored
You can either store crypto yourself or have a crypto trading platform store it for you. However, the process for both parties is the same. Crypto wallets are the pathway to your crypto. This digital wallet has public and private keys you can use to access and exchange funds with other crypto users. You can share your public key to conduct transactions, but you must never share your private key. Anyone with the private key can enter your wallet and move funds out at will.
Some people use these keys to conduct trades, while others use them to facilitate purchases. If you forget your public key, you can use your private key to get a new one. However, if you forget your private key, you can’t get a new one and will get locked out of your fortune. So most crypto investors write their private key code somewhere to ensure they don’t forget it.
What Is a Cryptocurrency Wallet?
A cryptocurrency wallet is a digital wallet that simplifies crypto storage. You can use this wallet to access crypto and make transactions. Every investor needs a wallet unless they trade on exchanges that store cryptocurrency assets for them. iTrustCapital handles storage for cryptos you buy through them to simplify crypto ownership.
Storing Cryptocurrency: How Do Wallets Work?
Crypto wallets do not contain crypto. These wallets store your private and public keys, the resources you need to access your crypto holdings on the blockchain. Your cryptocurrency is safe on blockchain technology. However, you can lose your capital if someone obtains your private key. If someone discovers your private key, you should transfer all of your funds to a new crypto wallet.
Types of Cryptocurrency Wallets
Investors can choose from several crypto wallets. Each wallet offers varying degrees of safety and convenience. As a result, investors often trade one for the other based on which wallet they choose.
Hot wallets are more accessible. They help traders make quicker transactions. However, hot wallets come at a cost. They are always connected to the internet and are not as secure as cold storage. You cause the following hot wallets to improve convenience and make your crypto readily available.
- Desktop Wallets: Desktop wallets are the most secure hot wallets. These wallets go on your computer and store the private keys instead of relying on a third party. Third parties make you more vulnerable to a cyberattack. A hacker can infiltrate a third party and access private keys if the third party isn’t careful. Desktop wallets are online all the time which makes them more vulnerable. Day traders often use these wallets and store small amounts of crypto on their private keys.
- Web Wallets: A third-party monitors and stores crypto keys on its server. Crypto exchanges use these wallets to make crypto more accessible to investors. This decision contributed to crypto’s widespread adoption, but it has risks. Some crypto platforms have cut off access to investors’ crypto holdings during economic turmoil. These exchanges know your private key so that they can shut you out of your crypto. This can become precarious if you use crypto to cover essential expenses. You should never put all of your crypto assets on these exchanges, but they offer a silver lining. These exchanges often purchase insurance which provides an extra layer of protection. You won’t have insurance on your own if someone steals your crypto.
- Mobile Wallets: These wallets come as apps on your mobile device. You can store your private keys and make crypto transactions. App users can use crypto as a medium of exchange or engage in day trading. Mobile wallets are useful for small amounts of crypto to cover purchases. However, these wallets are susceptible to cyber-attacks. Only put in as much coins in this wallet as you can afford to lose.
Invest In Crypto for Retirement
Cold wallets offer more protection than hot wallets. These wallets also go by cold storage and keep you offline. You can choose between these cold wallet options.
- Hardware Wallet: These wallets are separate devices that you plug into your computer when you want to use them. The hardware wallet stores your crypto keys. Since it is a separate device, a hardware wallet is not vulnerable to hackers. The hard drive comes with authentication features that add extra layers of protection. You should purchase a trusted wallet instead of buying it in used markets. Some hackers put malicious hardware wallets on used markets that steal your crypto instead of keeping your private keys secured.
- Paper Wallet: A paper wallet is as low-tech as you can go, but it’s one of the most secure ways to store crypto. Some crypto investors write their private key details on a piece of paper. This cold storage method protects you from hackers, but this method has some flaws. Someone can take a picture of your paper wallet and access your crypto, but you can hide this wallet to prevent that scenario. Losing your paper wallet or getting the paper damaged (i.e., water spills on it, the paper accidentally gets ripped, etc.) can lock you out of your crypto. Investors using the paper wallet approach often write their private key on multiple pieces of paper to mitigate risk. You should also put this paper wallet in a sealed plastic bag to keep it safe.
Store and Invest in Cryptocurrency for Your Retirement
Your retirement years shouldn’t be filled with financial stress. Instead, these should be enjoyable years where you get to live comfortably and explore. Investing early and often can lead to a smooth retirement. Retirement accounts offer tax-deferral strategies that legally let you avoid paying capital gains on your investments.
These retirement accounts have helped stock investors and real estate landlords accumulate wealth. For a while, crypto investors did not have this option. They couldn’t invest their crypto and avoid paying capital gains via a retirement account. Now, investors have a solution.
iTrustCapital has helped over 175,000 people create crypto IRA accounts. The crypto IRA provider has helped facilitate over $5.5 billion in transactions as more people want to add cryptocurrency investments to their retirement portfolios. Avoiding capital gains on crypto can save you thousands of dollars in the long run. Even if you prefer to trade crypto, you still won’t pay capital gains taxes if the trading takes place in a crypto IRA. iTrustCapital only charges a 1% transaction fee and has no other costs.
Bitcoin has had its ups and downs, but the popular crypto has always recovered from crashes. Altcoins like Ethereum have demonstrated similar resilience in the face of adversity. Some people see current crypto price points as compelling long-term buying opportunities. If you want to skip capital gains taxes on that crypto, you should create a crypto IRA account with iTrustCapital today.