Why using several crypto wallets is good? There are lots of different types of crypto wallets available out there that come from different providers and with different features which may make you wonder whether or not you should use one or several of them and will it be safe to do so.
This is a very good question because with more and more people entering into the crypto ecosystem it is vital for every user to be well concerned about the safety of their crypto coins when they hold them, Bitcoin or any other.
Most users, especially the beginners or the inter-level users, usually want to have a dedicated wallet for each type of crypto coin.
This, they think, and they are not completely wrong, is the best way in which they can guarantee the security of their coins.
Well, though this is a very strong point to substantiate the need to use different crypto wallets at the same time, it is not the only one.
There are lots of other good reasons to use multiple crypto wallets as you will come to know when you read this article in its entirety.
Through this article, you will come to know the reasons, the types, the benefits, as well as a lot about consolidating and tracking multiple crypto wallets.
This will surely clarify all your doubts regarding this matter.
If you are in a dilemma, this is an article that will help you a lot to make the right decision.
Read it carefully and follow it so that you can take special precautions when you use different crypto wallets to diversify your digital assets rather than keep ‘all the eggs in one basket.’
Why Using Several Crypto Wallets is Good for You?
It is much better than storing all your crypto in one wallet and instead spread them over multiple exchanges or wallets.
Convenience and security are two most significant reasons to use multiple crypto wallets. It is simple math and understanding.
However, you will need to test the waters before choosing them and also know how to keep a track of them and consolidate them.
It is always good to try the wallets out with small amounts deposited in different hot wallets.
And, if they provide you with some interest in return, it is all the better.
Well, the most significant reason, as said earlier, to store crypto in multiple wallets is security.
Security is primarily important if you have significant amounts invested in crypto.
It is true that most of the crypto exchanges today do a better job to try and keep the assets of their clients’ safe in the online wallets than they did in the earlier days, they are still the most vulnerable targets for the hackers.
This is where and why the perception of security diversification sets in.
When you have all your crypto well spread, it reduces the probability of losing all your money to the hackers.
The hackers may gain access to one wallet but not all of them at the same time.
Now, an example will make things clearer to you as to why you should spread your digital asset holdings over several different crypto wallets.
Assuming that you have a lion’s share in BTC and ETH along with some amount of money invested in XRP and NEO, it is needless to say, keeping all your wealth on one account is not a very good idea in this regard.
This is especially true if you do not want to sell them soon to minimize the risks.
The best way to store your major coins such as BTC and ETH for a long term is to throw them in a hardware wallet such as a Trezor or Ledger Nano S.
Now, consider the other crypto coins in your kitty, NEO and XRP. For NEO, you can store them in a NEO specific wallet.
This is a good idea because these wallets are designed to facilitate staking the coins for NEO Gas and will also make the process comparatively seamless.
As for your XRP coins, it is always a good idea to keep them handy because this specific crypto coin has quite a turbulent history due to its regulatory status. In order to store your XRP coins, you should choose a multi-currency wallet but make sure that it supports XRP.
This is important because this particular coin has been delisted by most of the major crypto exchanges.
And, if you want to have an easier and faster access to your XRP coins, it is best to store them in another software wallet or on an exchange that supports it.
This may even allow you to get a return of as much as 10% APY on it as a bonus.
So, following this way you have actually diversified your entire crypto holding of BTC, ETH, XRP, and NEO much more effectively and have also ensured that you make some passive income through them irrespective of the volatility of the crypto market.
In the process, you have also ensured that it is well protected from the prying hands of the hackers.
Still confused? Well, here are a few other aspects to know which will better your understanding about the real value of spreading your crypto holdings over multiple different crypto wallets.
Well, start with the varied reasons to use several crypto wallets to store your digital assets.
But first, take a deeper look into the matter which will also help you understand exactly how many crypto wallets you need to have.
A couple of years back, at the end of 2018 to be precise, a Bitcoin wallet came into the fore.
Within three full years, the total holding of this wallet grew to excess of 111,000 BTC with its value nearly $850 million.
This made the wallet one of the largest ones to hold digital assets by any standards.
This signifies the enormity of people invested in BTC.
The best part of all is that the owners of the wallet are still anonymous even after creating a lot of buzz and news in the market, thanks to the blockchain ledger technology.
However, one major concern still prevails.
It is that the people can see the transactions happening in it which, surely, can draw some undue and unwanted attention from the hackers.
Even if the identity is undisclosed, one who is keen in exploring crypto transactions, especially the large ones, will easily find them on the blockchain ledger.
This really does not take any special ability to take note of these large transactions. In fact, any watchful investor can find them easily.
This means that people will be able to take notice of your wallet every time you move your crypto coins.
Though the blockchain ledger technology is designed to keep a track of all transactions and maintain a proper record of it, it can be quite risky for those people who have large amounts invested in crypto.
Therefore, it is important for all crypto traders and investors to have multiple crypto wallets to spread their holdings.
It will prevent unnecessary attention to your crypto wallet.
Remember, criminals are attracted towards appealing wallets which is why keeping a single crypto wallet is way too risky.
And, it is not only hacking of your crypto wallets that you should be concerned about. There are also several other reasons to have multiple crypto wallets.
As you may know crypto is as such decentralized and therefore, if by any chance you happen to lose or forget your passcode or private key, you will not be able to access your wallet without it.
This means that you stand to lose all your coins, forever, with no chance of recovery.
Therefore, having and using multiple crypto wallets is best for a crypto investor or trader dealing with a large number of crypto coins and splitting their holdings and significantly mitigating the risks that are related with crypto wallets.
Even if one of your wallets is hacked or you lose the private key to it, you will still not lose all of your crypto holdings.
So, to say it in short and in a few words it can be said that storing your crypto coins in multiple wallets will help in ensuring a much better, if not a foolproof, risk management of your crypto assets.
This will also ensure that all your transactions are small in amount which is less likely to draw unwanted attention from others.
This means that it will add to the privacy aspect of your transactions.
Moreover, different types of crypto coins usually have diverse storage systems and security which is why using multiple wallets is a feasible and productive decision.
Therefore, make sure that you have dedicated crypto wallets for all types of crypto coins you own.
If you have invested a large amount in only one particular coin, then also divide it into several crypto wallets.
Ideally, using two to three different crypto wallets is a good idea, but the more the better.
Now, take a look at the different types of crypto wallets that you can choose from.
Ideally, your final choice should be based on your convenience, features of the wallets, and, most importantly, the security offered by the particular wallet.
There are more than a dozen different types of digital crypto wallets spread over all different software platforms on the internet along with quite a few physical ones that makes it quite a big list.
Ideally, most of these crypto wallets come in a few major formats. These are:
The software wallets can be accessed through the internet and are intangible.
You can access them via a website or use a specialized software for that.
This easy accessibility is the benefit offered by it but it also makes these wallets more susceptible to hacking.
Several major crypto exchanges have their own wallets. Apart from that, there are also a few isolated hot wallet vendors that offer such service.
Besides that, you will also find desktop app wallets and mobile wallets as other few commonly used software wallets, also called ‘hot wallets.’
The hardware wallets are physical devices to store your private keys. These are pretty small and portable and look more like a USB flash drive.
You can plug it into your computer to hook up with an interface so that you can access the information stored in it and trade your crypto.
There are a few hardware wallets that come with their own interface as well.
Even if you lose your wallet, your keys will be safe because these are password or PIN protected.
You can easily regenerate the keys using a ‘seed phrase’ when you want to move your coins to a new hardware wallet, also called ‘cold wallets’ because you do not need to connect it to the internet.
This keeps your wallet well protected from malware, phishing, and other attacks making these an ideal device to store large amounts of crypto coins.
These wallets are not frequently used or recommended to use. However, you can still use these wallets if you are very careful from your end.
These wallets are purely a piece of paper that has the private keys written on it.
You can call these wallets a cold wallet technically because it also does not need connecting to the internet.
Therefore, these are well protected from cyber attacks. In fact, it is impossible to hack.
However, there is a significant risk of using a paper wallet. Anyone who may get hold of this will have all the information easily and gain access to your crypto wallet.
It is also susceptible to damages due to fire and water. Therefore, you are to make sure that it is completely secure in your home.
Even better, store it in a more secure place such as the locker in your bank.
It is time now to take a look at the different benefits of using multiple wallets to store your crypto, over and above those that are already mentioned above.
You will find that most crypto-specific wallets do not support storing multiple currencies in it.
For example, if you are using a Litecoin Core desktop app wallet, you will be able to store only Litecoin in it.
This means that if you want to branch out of Litecoin and invest in Ether, for example, on the Ethereum network, you will have to use a different wallet for managing your private keys and other information related to Ether.
Therefore, when you use multiple wallets it will be easy for you to store multiple crypto coins.
More often than not, you will not be able to take part in crypto staking when you use a multi-currency crypto wallet.
In most of the cases you will need to have a specific wallet for a specific crypto coin that you want to use to enter into a staking pool and get rewarded for it which is usually done by the same coins.
Therefore, if you want to gain access to staking, you must have multiple and coin-specific crypto wallets.
A lot of crypto investors, especially those who have invested a large amount in one particular crypto coin, usually tend to have multiple wallets to store their coins.
Using multiple crypto wallets typically allows them to create some sort of savings and checking accounts like those you usually find in a traditional bank.
You can use one wallet, preferably a hardware wallet, which may be designated as the ‘savings’ to store the valuable information and private keys that you do not use often.
On the other hand, you can use the other, which can be a software wallet or a web-based wallet of a crypto exchange, as your ‘checking’ wallet when you need to buy or sell your crypto coins.
This will offer a two-fold security to your private keys to protect it from curious eyes but at the same time allow you to actually take part in crypto exchange when you think the time is right.
Since diversification is the key aspect of investing, it is also applicable in crypto investments.
When you diversify your crypto portfolio by storing the coins in different wallets it will ensure safety of your coins, the most significant benefit of it.
Tracking Multiple Crypto Wallets
A question may naturally come to your mind at this point, which is, will it not be inconvenient to keep a track of all the crypto wallets properly?
Well, not really.
You can use one of the several financial tracking apps available in the market for that matter.
These all-inclusive financial tracking apps can track crypto coins, wallets as well as other assets most effectively making the tedious job much simpler for you.
This will save a lot of your time which you can invest in making proper plans about your next trading moves to achieve your objectives.
Choose one of these web-based apps that is easy to access and is built on custom structural design.
This will allow you to connect with multiple crypto accounts as well as the accounts of your banks, crypto exchanges, brokerage, and more.
This will ensure that you are up to date with all your transactions.
You will find it much easier to keep a track of every transaction because you will have only one interface to interact with which will in turn help you to make much more productive and informed trading and financial decisions.
Most of these apps are very easy to use and you do not need a lot of technical knowledge for that.
All you have to do is add the asset and enter all its details.
No matter how many crypto wallets you use and how diverse your crypto portfolio is, these apps will keep a track of all and keep you updated with most accurate information for a better overview and creation of your future plans.
These apps will not only allow you to track all your accounts but will also let you know the value of the crypto coins, depending on the type of app you choose.
Depending on the type of app chosen, you may also enjoy some additional and useful features such as integration with crypto experts, access to modern charts, net worth and performance of individual assets and more.
Consolidating Multiple Crypto Wallets
Finally, it comes to understanding the need and the ways of consolidating the multiple crypto wallets.
The most significant reason to consolidate the various crypto wallets is to ensure that you can monitor, manage and operate all your wallets in a much more streamlined way.
This will ensure that you make higher returns from your investment since you will be more knowledgeable about the patterns as well as the performance of your crypto portfolio.
And, most importantly, you will not need to use more than one tool for that.
When you know which particular investments are paying off well and which are not by looking at the patterns, you can capitalize on the productive ones even more by following the current market trends.
You can ditch those that are not providing higher returns and focus more on those assets that will help you to reach your financial objectives and expectations much more realistically and easily.
Such a feature will also help you make smarter and smaller diversification decisions at the right time.
This is very important today to survive the tough competition in the crypto market that is known for its rapid and extensive technical developments and volatility.
If you have your crypto portfolio well-diversified, it will offer you a complete peace of mind even if world events change the entire financial ecosystem.
This is a huge factor that will improve both your financial as well as your personal health due to less anxiety and stress.
There are lots of reasons to use different crypto wallets, preferably hardware wallets.
This will diversify your crypto portfolio and keep the coins safe just as the decentralized nature of cryptocurrencies do.
I have special interest in crypto and intend to help common people to gain knowledge about the digital asset as well as its potential. Follow Me at Linkedin.