How to Safely Store Your Cryptocurrency

Cryptocurrency offers exciting opportunities for New Zealanders, but keeping your digital assets secure is critical. With rising cyber threats and scams, choosing the right storage method is essential to protect your investments. This guide explores the differences between hardware wallets and hot wallets, provides best practices for securing your crypto, and highlights New Zealand-specific considerations.

Hardware Wallets vs. Hot Wallets: What’s the Difference?

Crypto wallets come in two main types: hardware wallets (cold storage) and hot wallets (online storage). Each has its pros and cons, so let’s break them down.

Hardware Wallets (Cold Storage)

What are they?
Hardware wallets are physical devices, similar to USB drives, that store your cryptocurrency’s private keys offline. Popular brands include Ledger and Trezor,

Advantages:

• High Security: Private keys are stored offline, making them immune to online hacks, phishing, or malware.

• Control: You have full control over your assets, with no reliance on third-party services.

• Recovery Options: Most hardware wallets provide a recovery seed phrase (usually 12–24 words) to restore your funds if the device is lost or damaged.

• Support for Multiple Coins: Many devices support a wide range of cryptocurrencies, from Bitcoin to Ethereum and beyond.

Disadvantages:

• Cost: Hardware wallets typically cost NZD $100 -$300, which may be a barrier for beginners.

• Learning Curve: Setting up and using a hardware wallet requires some technical knowledge.

• Physical Risk: If not stored securely, the device or recovery seed could be stolen or lost.

Best used for: Long-term investors or those holding significant amounts of crypto who prioritise security.

Hot Wallets (Online Storage)

What are they?
Hot wallets are software-based wallets connected to the internet, such as mobile apps, desktop software, or browser extensions. Examples include MetaMask, Phantom, and exchange-hosted wallets like those on Binance or EasyCrypto.

Advantages:

• Free or Low-Cost: Most hot wallets are free to download and use.

• Convenience: Easy to access for trading, spending, or managing crypto on the go.

• User-Friendly: Ideal for beginners or those with smaller crypto holdings.

Disadvantages:

• Vulnerability: Since they’re online, hot wallets are susceptible to hacks, phishing attacks, and exchange failures.

• Third-Party Risks: Exchange-hosted wallets mean you don’t control your private keys, leaving your funds at risk if the platform is compromised.

• Limited Privacy: Some hot wallets require KYC (Know Your Customer) verification, which may concern privacy-focused users.

Best used for: Active traders, small crypto holdings, or users who need quick access for everyday transactions.

Best Practices for Keeping Your Crypto Safe in New Zealand

Regardless of the wallet type, follow these tips to maximise security:

1. Never Share Your Private Keys or Seed Phrase
   Your private keys and seed phrase are the keys to your crypto. Never share them with anyone, including so-called “support” teams. Store your seed phrase in a secure, offline location, such as a fireproof safe or safety deposit box.

2. Use Two-Factor Authentication (2FA)
   For hot wallets or exchange accounts, enable 2FA (preferably using an authenticator app like Google Authenticator rather than SMS). This adds an extra layer of protection.

3. Keep Software Updated
   Regularly update your hot wallet apps and hardware wallet firmware to patch security vulnerabilities. Check official websites (e.g., Ledger or Trezor) for updates to avoid fake prompts.

4. Beware of Phishing Scams
   Scammers often target New Zealand crypto users with fake emails, websites, or social media messages. Always verify URLs and never click suspicious links. For example, ensure you’re on www.ledger.com, not a lookalike site.

5. Diversify Storage
   Don’t keep all your crypto in one place. Use a combination of hardware and hot wallets. For example, store most of your assets in a hardware wallet and keep a small amount in a hot wallet for trading or spending.

6. Test Your Backup
   Before transferring large amounts to a hardware wallet, test your recovery seed phrase to ensure you can restore access. A small mistake in recording the phrase could lock you out permanently.

7. Secure Your Devices
   Ensure your computer or phone is free from malware before interacting with your wallets. Use antivirus software and avoid public Wi-Fi when accessing your crypto.

Which Wallet Should You Choose?

For Beginners: Start with a trusted hot wallet like Phantom or MetaMask for small amounts while learning the ropes. Transition to a hardware wallet as your holdings grow.

For Long-Term Holders: Invest in a hardware wallet like Ledger or Trezor for maximum security. The upfront cost is worth it for peace of mind.

For Active Traders: Use a hot wallet for convenience but transfer profits to a hardware wallet regularly to minimise exposure.

For Businesses: If accepting crypto payments in NZ, consider a hot wallet for daily transactions and a hardware wallet for storing larger sums.

Where to Buy Hardware Wallets in New Zealand

To avoid counterfeit devices, purchase hardware wallets directly from official vendors or trusted retailers:

• Ledger: Order from www.ledger.com (ships to NZ).

• Trezor: Available via shop.trezor.io with NZ shipping.

Always initialise your hardware wallet yourself and never buy used devices, as they could be compromised.

Our Thoughts

We think everyone should own a hardware wallet to take control of their funds. Self-custody is a cornerstone of why Bitcoin, and cryptocurrency in general, is so valuable. By holding your own private keys, you eliminate reliance on third parties, such as exchanges, which can be vulnerable to hacks or insolvency. Bitcoin’s decentralised nature empowers individuals, and a hardware wallet ensures you fully embrace this financial freedom. While hot wallets offer convenience, we strongly recommend transitioning to a hardware wallet for long-term security. Our Crypto 101 online course dives deeper into security, covering advanced wallet management, scam prevention, and other essential topics to help you confidently protect your crypto investments. If you are still unsure or have any questions about how to secure your crypto safely, get in touch with us today.