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Cryptocurrency Trading: Difference Between a Hot and Cold Wallet

April 10, 2019

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Every crypto wallet falls into either one of these two categories: hot wallet or cold wallet. Both have their advantages and drawbacks. Choosing the best wallet for you comes down to personal preference and trading style.

Hot Wallets

Wallets that are categorized as hot wallets include the desktop wallet, online (web) wallet, and mobile wallet. Wallets in this category are constantly connected to the internet. It is more convenient and provides a more efficient platform to send and receive funds.

It is either a software downloaded to the device or linked to the exchange account. However, it can be a blessing and a curse. The constant connectivity to the internet makes it vulnerable to phishing, virus attacks and malware. There is also the risk of losing your funds if you store your keys in these hot wallets.

Cold Wallet

Cold wallets include paper and hardware wallets. It is generally more secure than its hot counterpart. It is only connected to the internet when a transaction is conducted, making it more difficult to hack.

Its drawbacks include the possibility of transactional errors and its comparatively slow nature. There is also the risk of the wallet being damaged or lost.

Hot or cold, both wallets have their supporters and detractors alike. You could consider splitting your funds into both hot and cold wallets, depending on your trading style.

Kyle Young

Working as a cryptocurrency research analyst at www.vhcex.com which offers extensive cryptocurrency trading pairs with unparalleled customer support. Passionate about technology. Video games provide the break from my daily life routine.

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.