Cryptocurrency account holders are raking in profits from crypto investments across various blockchain exchanges. Bitcoin leads the pack as the most purchased digital currency, with a record of over 81 million wallet owners.
Have you finally considered venturing into the cryptocurrency trade? If yes, you can get a cryptocurrency wallet for each digital asset or put all your coins in a single wallet. Optimistic beginner traders need to make informed decisions that will impact their trading experience positively.
To determine if you should use multiple crypto wallets or a multi-chain platform, you must familiarize yourself with how they work.
What it Means Having Multiple Cryptocurrency Wallets
Choosing several cryptocurrency wallets implies spreading your digital assets to different exchanges. Coinbase, Ledger, Exodus, and Trezor are some of the custodians of digital assets that you can use to transact other cryptocurrencies.
From an investment point of view, having several digital wallets has advantages, such as allowing you to separate your assets and track them individually. However, juggling multiple wallets is not easy for some people, but those who can manage a few benefits immensely from this trading arrangement.
Pros of Using Multiple Cryptocurrency Wallets
Why do many people operate with several cryptocurrency wallets? There must be great reasons for that. Here are the top ones to start.
1. Cryptocurrency Diversification
You need a multi-cryptocurrencywallet that supports multiple currencies, such as Bitcoin, Litecoin, Ethereum, Ripple, Monero, etc., to trade desired digital coins without feeling restricted. It is impossible to trade multiple currencies if you use a wallet that only supports one cryptocurrency.
The primary benefit of diversifying your cryptocurrency trade is that even if some coins drop in value, you can count on the rest to perform well. Cryptocurrency diversification is also an opportunity to familiarize yourself with a range of digital currencies and a higher chance of knowing when there are new market entries to seize.
Diversifying cryptocurrency should make sense if you enter the trade as a long-time investor because it is a risk that takes time to yield significant returns.
2. Digital Assets Safety
Having all your digital assets in a single cryptocurrency wallet is catastrophic because you will count your losses if it comes crumbling down. One of the most common headlines in the cryptocurrency world is of cryptocurrency wallets shutting down for reasons such as bankruptcy or hacking.
A perfect example is the hacking of Bitfinex in 2016, which saw the loss of 120,000 Bitcoins, taking the U.S. government almost six years to seize the loot. If such were to occur in your digital currency investments, you would have to start from scratch. That would be different if you had other cryptocurrency wallets to fall back on.
Another safety aspect of having several wallets is that cybercriminals cannot easily target you. Crypto transactions are usually visible in a blockchain, and hackers can watch them multiply. You would lose everything if criminals or another party got hold of your private key and gained access to your assets.
Besides losing your private key to hackers or thieves, you can forget or misplace it, hence losing permanent access to your account. Spreading your crypto assets in different wallets helps you stay lowkey without drawing much attention, which would make you a target of cyber attacks, thus safeguarding your assets.
What it Means Having a Multi-Cryptocurrency Wallet
A multi-chain wallet allows you to manage several digital currencies under one roof. For example, you can receive or send transactions to different cryptocurrency addresses using a multi-currency desktop wallet.
Reliable multi-cryptocurrency wallets have friendly user interfaces to enable effortless navigation by new traders. Security also matters when dealing with a multi-chain wallet because a slight mishap in the blockchain algorithm can give way to hackers.
A multi-currency wallet uses a single private key to access your assets. You can use a multi-currency exchange if managing multiple wallets for different digital assets sounds hectic. Operating within a single wallet has its benefits, and they include the following;
1. Quick Accessibility
All digital assets are conveniently within reach under one account in your device. You don’t need to log in to several accounts or software, like having multiple wallets.
2. Easy Records Storage and Performance Analysis
You can view all your transaction records in a single platform and analyze the performance of different digital coins. It makes it easy to identify the most volatile and highest trading currency, enabling you to make adjustments where applicable.
3. Discounted Transaction Fees
Unlike when you’re dealing with a multiple wallet scenario where you should pay transaction fees in each account, most multi-cryptocurrency exchanges charge discounted charges for users with several assets based on their transaction frequency.
4. Security
Multi-chain wallets created on smart contract platforms can verify the identity of users using biometrics. Multi-cryptocurrency platforms also use several security layers to prevent hackers from having easy access. More importantly, you only need to remember one private key, unlike many accounts where you can easily forget some.
5. Simple Registration Process
Registering in a multi-cryptocurrency wallet is straightforward and quick because only one account is involved. You start by selecting a platform that supports the digital coins you want to buy or sell. What follows is creating an account using credentials like an email address and a password.
After opening an account successfully, you are expected to deposit funds in your wallet by purchasing them from the exchange or acquiring them from another wallet. The last step is commencing your trading experience by selling, buying, or paying for purchased goods and services.
Bottom Line
Now you know what to expect if you choose any of the highlighted cryptocurrency trading options. It should be about your needs as a trader and the goals you would like to achieve, whether short-term or long-term.
The cryptocurrency market has an abundance of exchanges, but not all pass the trust test, a reason for you to do due diligence before making a choice. It is also worth noting the cryptocurrency sector is dynamic, and what is working for you today may become irrelevant tomorrow.