Exchange or your own wallet: where to keep your crypto
The difference between keeping crypto on an exchange and in your own wallet, the benefits and risks of each, and how to decide.
One of the first questions beginners ask me is: “I’ve bought some crypto, where should I keep it?” There are two basic options: on an exchange or in your own wallet. Both are fine, but it is important to understand the difference.
Exchange
When you keep crypto on an exchange, a company holds it for you, much like a bank holds the money in your account. You log in with an email and password, and the company holds the keys.
Benefits: it is simple, buying and selling is easy, and if you forget your password you can recover your account through support.
Risks: you depend on the company. If the exchange runs into trouble or locks your account, you cannot reach your crypto. That is why you should only use reputable exchanges that are authorised to operate. In the EU this is governed by the MiCA regulation; in Croatia, supervision is carried out by HANFA.
Your own wallet
Your own wallet is an app or device where you hold the keys yourself. When you create it, you get a seed phrase of 12 or 24 words. Whoever has those words has the money.
Benefits: nobody can freeze your account or lock your funds. The crypto is truly yours.
Risks: all the responsibility is yours. If you lose your seed phrase, the money is lost. If someone else learns it, the money is stolen. There is no support team that can undo that.
How to decide
- Small amounts you trade can be kept on a reputable exchange.
- Most of your savings that you plan to hold long term is better in your own wallet, ideally a cold wallet (a device that is not connected to the internet).
- Many people use a combination: an exchange for buying and selling, and their own wallet for storage.
Whatever you choose
Either way, you are the last line of defence:
- turn on two-factor authentication (2FA) for your exchange and email,
- do not open links from messages, type the address yourself,
- never type your seed phrase online and never give it to anyone,
- never invest money you cannot afford to lose.
If you are not sure what is right for you, we can talk it through in a consultation. The first 20 minutes are free.
The content of this website is for educational purposes only and does not constitute financial or investment advice. Investing in cryptocurrencies carries a high risk, including the possible loss of your entire investment.