Safest Way to Store Crypto

$2.2 billion worth of crypto was stolen in 2024, with an estimated $3.7 billion of Bitcoin permanently lost due to forgotten private keys.

That's why knowing the safest way to store crypto matters, but how do you choose? In this guide, curated by crypto experts, we’ll break down the safest way to store crypto in 2026. We’ll discuss the various options, from hot wallets to hardware, and how you can keep your crypto safe.

Crypto key storage 101

When it comes to crypto storage, it probably feels like you need a degree in cryptography just to get started. Luckily, you’re reading this blog, and we can break it down into 4 key concepts:

Private keys

Private keys are a piece of cryptographic data. It’s like a password: A string of encrypted letters and numbers that allows you to access and manage your crypto.

You use your private key to sign any transactions from a given wallet. This means hackers are very interested in trying to get a hold of your private keys.

Custody

Custody is the concept of who controls your private keys. When you use a crypto exchange, like Binance or Coinbase, that exchange becomes the custodian of your private keys.

This is kind of like traditional banking. While you have an account, it isn’t you who holds your funds or has access to the transaction – the exchange makes the transaction on your behalf.

Hot wallets

Hot wallets, also known as software wallets, are any crypto wallet that’s connected to the internet – digital storage that you can access through your PC or phone.

As they’re always connected to the internet, they're more vulnerable to hacks and thefts.

Cold wallets

Cold wallets, also known as hardware wallets or cold storage, are where your private keys are held in an offline environment (like a USB).

There are a lot of options when it comes to cold wallets, from simple paper wallets to hardware wallets with extra security features.

Now, let’s break down each storage option so you can understand all the pros and cons.

Is it safe to keep crypto on an exchange?

Exchanges are the least secure place to store your crypto. Simply because crypto exchanges and networks are hacked a lot.

Some notable hacks include:

• $1.4 billion of ETH stolen from Bybit in 2025

• $308 million of Bitcoin stolen from DMM in 2024

• $230 million of several cryptocurrencies was stolen from Wazir X in 2024

• A total of $659 million DPRK-linked thefts in 2024

Even when the circumstances aren’t always this dire, many crypto investors still have issues with exchanges. Especially during volatile markets when exchanges halt sales and purchases, and there’s also downtime for developers to work on-site.

Pros and cons of a crypto exchange

Pros

• Cover your losses: If there is a hack, exchanges can cover the losses. However, smaller exchanges may not have this luxury.

• Decentralized exchanges: This way, you don’t have to give up custody of your private keys, but they still have their own issues.

Cons

• Regular hacking: With millions in funds in any given exchange, it’s like a honeypot for hackers.

• Lacking adequate reserves: If there is a bank run, there’s a risk the exchange doesn’t have adequate reserves and leaves you without access to your funds.

• Unreputable exchanges: Many exchanges cannot be trusted. For example, ACX, despite claiming to be Australia’s most liquid Bitcoin exchange, collapsed with more than $13 million in missing funds.

We know that sometimes you can’t avoid storing crypto on an exchange when you want to make certain transactions, so you need a way to lessen the risk. That’s why you should only store the exact amount you need and use other storage solutions for the crypto you plan to HODL.

Are software wallets safe?

A software wallet is only as secure as your device is – if your phone is full of shady apps, we can’t say much about how secure your crypto is.

If you follow best practice, you can make it more secure. If you don’t, your crypto could be even more vulnerable in a software wallet than in a crypto exchange.

Popular examples of software wallets include MetaMask, Exodus, Electrum, and Atomic.

Pros and cons of software wallets

Pros

• Custody: You are in control of your private keys.

• No exchange hacks or mismanagement

• Easily accessible: You can access from your PC or phone.

Cons

• Dependant on device security: If your device isn’t secure, neither are your funds.

• Security risks: As they’re hot wallets, they’re still vulnerable to hacking.

Common software wallet hacks

• Malware: Intrusive software designed to gain unauthorized access to a device. Malware can be downloaded completely by accident. Watch out for malicious apps, outdated operating systems, email phishing scams, and don’t connect to unsecured Wi-Fi.

• Fake software wallets: Hackers will go to great lengths to gain access to your crypto, such as creating fake software updates for your wallets.

• Keylogging software: They monitor keystrokes recorded by a user. Unfortunately, if you’re hacked, your private keys are no longer secure.

• Clipboard hijacking: A hacker switches out your public address for their own when you send crypto. This is very effective if you copy and paste your address to make a transfer.

As always, software wallets are sometimes essential for specific transactions. For example, many DeFi protocols require you to use a software wallet to stake tokens.

In this case, it’s important to follow best practices to ensure the security of your software wallet. You can also opt to use multi-sig software wallets to improve security.

Are hardware wallets safe?

Hardware wallets are considered the safest place to store crypto.

Back in the old days, paper wallets (literally pieces of paper with your private key on them) were common. And who hasn’t lost an important bit of paper at least once in their life? Losing that piece of paper also means losing all your funds. That’s how hardware wallets came to be.

Some of the most trusted hardware wallets include Trezor Model T, Ledger Nano X, and KeepKey.

How to use a hardware wallet

Hardware wallets started out quite technically complicated, but nowadays, they’re a lot more user-friendly and come with a lot of advanced security features to get around previous problems.

It’s pretty simple now:

1. When you want to send crypto, connect your hardware wallet to your PC/mobile using USB or Bluetooth

2. Once connected, sign any transactions related to your hardware wallet by using a PIN or password.

Pros and cons of a hardware wallet

Pros

• Seed recovery phrase: Just in case you do lose your hardware wallet, you now have a list of words as backup, which stores all the information needed to recover funds on the blockchain.

• Multi-signature security: Most hardware wallets require multiple private keys to approve a transaction.

• Software wallet integration: This can help speed up transactions while still maintaining the highest levels of security.

Cons

• Not great for active trading: Having to manually confirm every single transaction, over and over, can be time-consuming.

• Price: They’re not free, and if you want one with the best security features, they’re not cheap either. However, never be tempted to buy a second-hand hardware wallet. Let’s be honest, it’s probably already been tampered with, so why take the risk?

With all this said, the question remains: What’s the best way to store crypto?

What’s the best way to store crypto?

It all comes down to your unique circumstance. Consider how long you plan to hold your crypto, how often you plan to trade, and how much crypto you hold.

For most investors, a mix of custodial, software wallets, and hardware wallets is the best way to store crypto.

Remember the pros and cons of each type when you’re choosing.

Security tips for the safest ways to store crypto

Storing crypto on an exchange:

• Only store small amounts.

• Only store what you plan to trade.

• Use trustworthy and reputable exchanges.

Storing crypto using a hardware wallet:

• Store crypto you plan to HODL longer term.

• Pick a hardware device with a seed recovery phrase (and store your seed recovery phrase somewhere secure!).

• Never buy from anywhere other than the manufacturer.

If you’re storing crypto using a software wallet, you should always follow best security practices.

How to keep crypto safe: Best practices

The good news is, there are lots of ways to keep your cryptocurrency safe:

• Password best practices: Use different passwords for every single account, and make sure they have no personal relation to you (yes, your dog’s name is cute, but now’s not the time). Avoid cloud-based password managers and never store seeds on any password manager.

• Enable 2FA: Always enable two-factor authentication.

• Use multiple emails: Don’t use your personal email for your accounts on various crypto exchanges, as they are far more vulnerable to data breaches.

• Use reputable exchanges: If you’ve never heard of the exchange, then proceed with caution. Never hold more crypto than you’re willing to lose on a smaller exchange.

• Use multiple exchanges: Even if you’re using larger exchanges, still use multiple. This splits your hot coins and means there is one less single point of failure.

• Keep your PC/mobile device clean: Now’s the time to invest in the best antivirus software possible, and avoid using unsecured sites, Wi-Fi networks, or clicking on any spam links.

• Keep software up to date: Outdated operating systems are an easier target for hackers. Always download updates directly from the manufacturer/provider.

• Double-check the URL: Scammers have gotten better at replacing sites just by changing a few letters. Always double-check that you’re on the site you’re meant to be on before making any transactions.

• Use multi-sig wallets: These require two or more private keys to sign a transaction. Even if someone gets hold of one key, they still have no means to move your crypto.

• Keep your seed phrase somewhere safe: Store it in an offline location, like a safe deposit box.

How crypto wallets work with Koinly

Whatever crypto wallet you’re using, or however you’re storing your crypto, you can use Koinly to make your life easier and calculate your crypto taxes.

We support all major crypto exchanges, as well as all major software wallets, like Exodus, MetaMask, and Electrum. We even support hardware wallets like Trezor, Ledger, and KeepKey.

With Koinly, all you need to do is import your transaction data via read-only API by adding your public wallet address, and it’ll calculate your taxes and generate tax reports based on your location.