All trading platforms in the market have some form of connection to a cryptocurrency wallet. The best crypto exchanges have their own wallets embedded in their ecosystems, and many of them are quite good. Some exchanges like KuCoin and Binance have outstanding, extensive wallets that serve the purpose of storing user funds of every kind. Digital assets from vast lists of tokens and coins can be stored in such wallets alongside NFTs. These wallets provide a broad range of functions, which extend well beyond simple transfers and withdrawals. The most popular wallets can be used to view NFT collections, browse through marketplaces, and act as access credentials into various decentralized applications.
It is also the wallet that will act as the main workhorse of the crypto investor, accepting their deposits and showing off the full portfolio. Some wallets include embedded portfolio managers, market data aggregators and a lot of useful functions that essentially turn them into mini exchanges in their own right. Such wallets are ideal for cryptocurrency trading and storage of large amounts of assets. Users of such repositories can sometimes even avoid having to visit crypto trading sites and can perform all of their operations directly through the wallet.
Some crypto bank card services operating on the cryptocurrency market have their own wallets embedded in their applications. As neobanking solutions, they provide their clients with on-the-go trading and over the counter services for instant purchase and exchange of crypto currencies. Such convenience does not come with much of a tradeoff, since most of the crypto bank card services have been adapted to mimic the conventional solutions provided by traditional banks. In fact, the similarities between the two financial systems often end at the point where users select which funds they want to use in order to perform their everyday operations. Crypto bank cards automatically convert any digital currency at favorable exchange rates and are accepted in any trading post or merchant website where VISA and MasterCard are accepted.
Crypto trading is just as heavily reliant on the choice of crypto wallet, since users will have to use it extensively and frequently. The internal conditions of the wallet will determine how convenient it is and whether it can be connected to a certain exchange without the user having to incur additional fees. Indeed, some wallets charge their users for withdrawals and transfers to external wallets. It is nothing personal, since wallet developers are also pursuing commercial goals and want to make a profit for their efforts.
As such, if the choice of wallet stands for trading crypto, users need to select such a repository that will be favorable from a commission standpoint and the lineup of assets it supports. Most average users will not pay attention to these details, since the wallet will be used for storing idle funds and infrequent transfers. However, crypto traders are a different breed, a demanding one at that, one that will be tenacious and quite picky about the instruments they use.
Crypto market realities also dictate that users should consider whether they want a hot wallet, or a cold one. The choice will be determined by the requirements of the individual user and whether they are risk-averse when it comes to general security. The fact of the matter is that most hot wallets are quite susceptible to hacker attacks, as are those that can be found on cryptocurrency exchange platforms. Despite the fact that most trading platform security systems are quite good, the hackers never sleep and are constantly looking for ways to penetrate the exchanges and siphon some cash. The human factor remains the most vulnerable of points in this regard, since the hackers are making extensive use of phishing attacks and are exploiting the vulnerabilities of both exchange training programs and the individual deficiencies of the employees.
The hot wallet is best used only if users are ready and willing to make frequent transactions and are not afraid of risking their funds. The best crypto traders, however, rely only on cold wallets as their repositories of digital capital. The cold wallet will never be breached by virtue of it being disconnected from the internet. This makes it impervious and the ideal storage place for large amounts of digital currencies. However, cold wallets are unfit for working with trading and some have such small lists of supported currencies that they do not even include Bitcoin Cash.
When trading using a cryptocurrency wallet, users must realize that the service will charge a commission for transfers or withdrawals. Some users are so inattentive that they fail to notice that the exchange they used and the wallet they resorted to both charge commissions. The exchange will charge a withdrawal commission, and so will the wallet once users decide to cash out their holdings.
Some wallets will charge a commission if the assets on it are being transferred to an e-wallet, such as PayPal, or if they are being cashed out. Needless to say, the crypto bank card services mentioned earlier also charge commissions on withdrawals. However, the charge usually applies to ATM withdrawals, something that most users are unlikely to resort to by virtue of the convenience of such cards and their applicability at merchant venues that accept VISA and MasterCard.
Another pro tip when working with crypto wallets in hot mode is making sure that they are non-custodial. In essence, this means that the wallet can be owned by a third party and the private keys needed to access it are stored with that party. This poses a potential risk, since there is always the chance that the third party itself can be hacked and access to the repository with the private keys will be breached. In that case, all the users of the given wallet will be affected. Such cases have happened many times with exchange wallets and the likelihood of a repeat situation is quite high.
A custodial wallet is a bit of a rarity nowadays, since it means that the user will retain the private keys and will have full custody of its safety. The given option is much more reliable from a security standpoint, since it means that it is the user who will have to deliberately give up access to their wallet to a malignant entity. The likelihood of that is quite small, though cases have been known when users were subjected to phishing attacks from hackers pretending to be the operators of the wallet.
Custodial wallets also have the added benefit of giving users the ability to retrieve access to their wallet if they ever lose their passwords. Non-custodial wallets will never be recovered if users lose their access credentials to them. Considering the fully private and decentralized nature of non-custodial wallets, they are most often found on decentralized exchanges and come with a rather limited toolset of functions. This also makes them less preferable for trading and frequent operations. Add to that the fact that decentralized platforms are known for slippage and favor goes to custodial options.
The crypto wallet is the starting point of a user’s journey in crypto space. However, choosing the right wallet to use for frequent trading is a matter of individual user requirements and preferences regarding convenience and security.