Take Self Custody of Your Crypto Before it’s Too Late

  • By: Walter Dunphy ACCA
  • Date: July 4, 2022
  • Time to read: 4 min.

Crypto is experiencing one of its biggest meltdowns in recent times, dropping from a total market cap of close to $3 trillion back in November of 2021 to now just sitting at $850m. This is a whopping 71% drop with no clear evidence that we are anywhere near a bottom yet.

This sudden drop which has been caused by numerous factors such as the collapse of Terra Luna and global monetary policy is putting many of the institutions and businesses operating in the crypto space under extreme pressure.

“Only when the tide goes out you find out who has been swimming naked”

Warren Buffet

It is now clear who has been taking risks with clients’ assets and showing no clear interest in anything other than profit-making. Regulation is needed and needed fast as it is clear the crypto space cannot operate unsupervised like it is at present.

The beginning of the end?

And we are seeing many companies take negative actions resulting in locking up customer holdings. Celsius were one of the first to pause customer withdrawals on June 13th.

More recently we have also seen Voyager to temporarily suspend activity on their apps.

All of these customers are left now in no man’s land not knowing whether they will see their funds again. It is looking more likely than ever that we will see a large crypto firm collapse which causes even further pain for the markets.

Do you actually own your crypto assets held on centralized exchanges?

Not your keys not your coins.

These events have highlighted how important it is that you have a self-custody of your own crypto assets. When you have your assets on Coinbase or any other crypto exchange they have custody and control of them. Do you really own your crypto if you don’t actually control it? The answer is no as things currently stand in the unregulated world of cryptocurrencies.

If a large firm such as Celsius or Coinbase were to ever go bankrupt they consider customer funds as unsecured creditors. Your crypto held with any of these centralized exchanges and lenders is not covered by any insurance fund like your cash at the bank would be.

When the inevitable happens we will surely see many court cases and backlash, but hopefully, it will never come to that for everyone’s sake.

What you should do

If you currently have any crypto sitting on a centralized exchange; it may be time to get them back into your own hands as soon as possible.

There are two methods of doing this 1) Hard Wallet and 2) Soft Wallet.

1) A hard wallet, which looks like a USB key, will give you the benefits of having complete control of your private crypto keys but also the most secure way to store them.

Two of the most popular suppliers of hardware wallets are Ledger and Trezor:

A hard wallet is so secure as it is completely disconnected from the web, so there are no opportunities for hackers to gain access to the device.

Most importantly, when you have your crypto stored on a hard wallet it is your property. Nobody will be able to stop you from moving it or using it as you wish.

The downside of this method is you will have to purchase the device which could set you back approximately €59.

2) If you are looking for a cheaper option then you can go with a soft wallet which can sit as an app on your phone or an extension on your web browser. With this method, you are storing your private crypto keys on your device, whether it be your laptop or phone.

What you need to be careful with when selecting a soft wallet is that each blockchain will have its own wallets. For example Ethereum has the likes of Metamask and Loopring and Cardano has Yoroi, Nami, etc.

It is very important to check what cryptos the wallet supports before you move your assets to it. If you make the mistake of sending the your crypto assets to an unsupported wallet then you risk losing them forever.

Final Thoughts

It could be days, weeks, or months until we see some seismic event happen that could further tank the Bitcoin price and the whole market along with it.

It is best to try and position yourself to be able to react and sell your assets if you need to. If you are leaving your assets in the hands of a centralized company that can restrict your access to those assets you will be in a desperate position.

A lot of people are daunted by wallet addresses and moving assets around to different wallets and avoid it altogether but in reality it is super easy to learn how to do it. There will always be a YouTube video on the subject that can help you learn in a couple of minutes.

Disclaimer: this blog post is for informational and educational purposes only and should not be construed as financial advice.

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