To buy or not to buy? That is the question. The short answer to that is nobody knows. I buy the dip, and the dip dips even more; when I choose to wait for the dip to dip, the market pumps. No lunch is ever free, but today we look into on-chain indicators which may, but not guarantee, help you spot crypto market bottoms.

While timing the bottom is a straightforward and simple concept, most of us WILL not get it right. Instead, experts suggest a lazy but effective approach to making money: dollar cost averaging. But the DCA approach takes time, and timing the bottom seems faster. You probably clicked on this article for that very reason.

1. On-Balance Volume (OBV)

The first indicator which may help you identify a possible market bottom is referencing the price with on-balance volume. OBV measures buying and selling pressure as a cumulative indicator that adds volume on up days and subtracts volume on down days.

This bangs on the fact that the volume will correlate with the price movement. If the price of an asset goes down, so will the volume similarly, and vice versa.

Judging from past cycles, the market bottomed out when the market cap fell below the realized cap, and the OBV indicator reflected values close to zero. Reversals and market recovery began when the market cap touched the delta cap and OBV index dropping below zero.

2. MVRV Ratio

We have gone through the MVRV ratio on our technical thursdays segment on IG, head over for a refresher.

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A post shared by Chain Debrief | Crypto Education (@chaindebrief)

MVRV, known as market value to realized value, refers to the asset’s fair value. It is often used to identify market tops and bottoms, reflecting periods of extreme investor unrealized profit/loss.

The BTC MVRV charts have fallen to their lowest levels in three years. Currently, we are hovering around the range at the bottom. Historically, values over ‘3.7’ indicated the price top and values below ‘1’ indicated the price bottom.

3. All Exchange Inflow (mean)

Exchange flow is the number of coins deposited into the exchange wallets, and exchange outflow is the number of coins withdrawn from exchange wallets.

A high value indicates investors are sending a greater number of coins in a transaction. It will also likely lead to higher selling pressure which could lead to a future price drop.

Here is a glimpse of how you are able to buy BTC at global bottoms. Historically, when BTC sees over a 30% plummet or more, the all-exchange inflow (MA7) will likely have a sudden spike to the exchange inflow range of close to 2 and/or higher. You take your entry positions after the indicator cools down, historically a signal for market bottoms.

From the chart above, if you were to follow this strategy, you would have ridden the massive wave in price surge twice. 2022 showed quite an anomaly, with the all-exchange inflow spiking and cooling off on four consecutive occasions, it does not seem we have reached the bottom yet, but a great range to accumulate.

#Ethereum price tops and bottoms are defined by coin flow
by @joao_wedson

Linkhttps://t.co/y0b47kBLU8

— CryptoQuant.com (@cryptoquant_com) January 9, 2023

4. Stock to flow

Crypto has its very own stock-to-flow model too.

In the 2018 cycle, Bitcoin’s downtrend finally stopped after breaking out of the previous Stock-to-flow price cycle.

The stock-to-flow model measures the new supply relative to the existing supply. As the name suggests, Stock refers to the total existing supply, while the flow is the new supply of an asset created yearly. 

While this measures and compares the relative abundance of scarcity, could it signal us to head out of these choppy waters? Maybe, maybe not.

If the aforementioned is going to be true, we have yet to see the worst of the markets; a larger storm is incoming. This very storm will take BTC to $8-11K levels which will not only spells disaster but spiral crypto markets into complete fear.

5. BTC BVOL, Historical Volatility

BVOL is the measure of Bitcoin’s historical volatility. The higher the BVOL score, the more volatile and riskier BTC as an asset is. The market trading sideways would likely lead to a lower BVOL score.

A low BVOL score is usually followed by an explosive move in price in either direction. Since 2018, Bitcoin has only been reduced to low levels of volatility only four times. Currently, we are in one of those times. 

Could we see another leg upwards? Or do we continue to search for the bottom?

Closing thoughts

Honorable mentions, SOPR ratio.

Market bottom detection by SOPR ratio
by @ghoddusifar

Checkhttps://t.co/6ZOIFoUTXy

— CryptoQuant.com (@cryptoquant_com) April 19, 2022

These indicators are not set in stone and are not 100% guaranteed success. Although they give you an idea of where the current market is referencing historical bottoms, timing the bottom is still difficult.

Instead, with the identified “bottoming” range we are currently at, it gives you a perfect time to accumulate a dollar cost average and ride any waves when the market is ready.

I think 2023 will be the year of a cool down, and we only see a significant upside in the tail end of it.

Also Read: The Rise And Fall Of Crypto Lending: What Went Wrong

[Editor’s Note: This article does not represent financial advice. Please do your research before investing.]

Featured Image Credit: ChainDebrief

It’s 2023 and there is no doubt that we are in the midst of a multi-year bear market. While this has become painfully obvious with the collapse of CeDeFi, the new narratives and thought leaders in crypto have yet to be properly etched out.

However, many crypto participants have been quick to latch onto trends, nostalgic of the gains made or missed in the bull market.

If you’re still in crypto however, it’s time to re-evaluate your view of the market, and where the bear will take us.

Also Read: This Bear Market Is Trying To Teach You Something

“Web3.0” is Dead, Long Live Crypto

Love it or hate it, the term “web3.0” comes from a centralized, capitalistic point of view. The incessant need to rebrand “crypto” originated from its negative connotations with cyber criminals, drugs, and online gambling.

Furthermore, the infancy of crypto meant that there were a lot of rough patches that the industry as a whole had to figure out.

2) We're going back to "crypto" (native, organic, punk rock) vs. "Web3" (bad juju, consultant approved, weak) in 2023.

More Personal Wallets, Privacy, DeFi, DePIN.

Less exchanges, black box lenders, and ponzinomics.

— Ryan Selkis (@twobitidiot) December 22, 2022

Web3.0 was a term used sparsely in conjunction with the ideals of crypto – decentralization and self-custody.

With only builders and long-term believers remaining, it is nigh time that these ideals lead the entire space, and we return to what crypto was originally about.

Once we reach proper product-market fit is achieved in crypto, we won’t need buzz words like “web3.0” – it will simply sell itself.

Fundamentals are in, and Retail Will Be Destroyed

With the collapse of most decentralized and centralized ecosystems, there will likely be a reemergence of importance in “DYOR”, with extreme checks and balances for funds still looking to invest.

Gone are the days of spray and pray tactics which guaranteed any VC a 100x on launch day. Instead, there will likely be an equities-like evaluation of any major project alongside extremely critical scrutiny.

While memes can, and will continue to succeed, the constant 1000x pumps pushed by crypto influencers will die in the bear.

What is @bonk_inu and how has it taken over @solana? This new dogcoin has a > $50M market cap and rising! #SOL #Solana #BONKhttps://t.co/boioqYvW7f

— BSC News (@BSCNews) January 3, 2023

A key example is Bonk Inu, a doge-like memecoin native to the Solana Network. Despite it’s narrative-grabbing rise, it has managed barely double digit returns since its release.

Products like GMX, Cap Finance, and Uniswap, instead, may see a return to stardom, as we migrate our funds back to Dino-Defi, if anything at all.

7/ Dying yields meant on-chain asset managers became invisible to most of crypto

However, as the market cycle shifts away from memes to fundamentals, asset managers could stand to net higher returns https://t.co/dniovi6ehT

— Chain Debrief (@ChainDebrief) January 3, 2023

With the return of fundamentals, one thing is for sure – retail’s advantage will slowly be chiseled away, much like with equity markets.

There’s No Point in DCA-ing

“Time in the market beats timing the market” is a popular saying amongst crypto influencers.

The phrase is borrowed from the stock market, which has a historic upward trend, and an average return of 10%.

In crypto, however, most coins fall spectacularly from grace.

A quick look at the top coins of 2019 shows that many of them have failed to outperform even Bitcoin, aside from Ethereum.

As such, fans of the DCA method have two major outcomes they have to decide between

• DCA into a non-blue chip that is likely to fail
• DCA into ETH/ Bitcoin and not outperform the market

While the latter option is likely a safe 5-10x, factoring in the rugs, volatility, and headaches along the way, it may be best to chase those kinds of multiples elsewhere.

Closing Thoughts

If you’re still here in 2023, it means that you haven’t (yet) given up on crypto. You’re here despite FTX, despite rugs, and despite >99% crashes.

However, pure conviction is not the end all be all. Whether you are a speculator or a builder in the space, theories need to be re-written and past portfolio all time highs have to be relinquished.

Coming into the new year, we should all approach Web3.0, I mean crypto, with a fresh slate.

Also Read: Key Takeaways From Messari’s Top 10 DeFi Trends In 2023

[Editor’s Note: This article does not represent financial advice. Please do your research before investing.]

Featured Image Credit: ChainDebrief

I’m sure everyone’s wish for Christmas and the New Year is that no more centralised entities go bust and that we start seeing higher prices. Well, we can’t control both, but at least we can limit our exposure to the former and be advocates of self-custody.

A centralised exchange (CEX) holds custody of your money. If a CEX abuses this custodial relationship, you can potentially lose everything that you have inside, ahem FTX. It’s not the end of the world without CEXes because there are fiat-to-crypto onramps for topping up your wallet and getting right into non-custodial DeFi without ever having to store a single cent on those arcane exchanges.

Today, we will look at how users can get into crypto without ever entrusting their funds to the hands of a CEX. Here’s our guide to crypto on-ramping without a CEX.

1) MoonPay

MoonPay is a financial technology company that builds payment infrastructure for cryptocurrencies. Their suite of on-and-off-ramp products provides a seamless experience for users to convert between fiat currencies and crypto using all major payment methods, including debit and credit cards, local bank transfers, Apple Pay, Google Pay, and Samsung Pay.

MoonPay is active in more than 160 countries and is trusted by 300+ leading wallets, websites, and applications to accept payments and defeat fraud.

MoonPay offers 23 different crypto coins for users to easily swap with a fee of 1% for bank transfers. For more information on their fee structure, you can click here.

1/ Go direct to DeFi

Starting today, you can now purchase crypto on the Uniswap Web App using a credit/debit card or bank transfer at the best rates in web3 thanks to our partnership with @moonpay! https://t.co/YVyk8e6d2h

— Uniswap Labs (@Uniswap) December 20, 2022

2) Transak

Transak is an onramp and offramp service that supports 130 cryptocurrencies on 75+ blockchains via cards, bank transfers and other payment methods in 125+ countries.

Transak sources liquidity from over ten exchanges to offer the best price for their customers and offers a robust risk engine with less than a 0.05% fraud rate thus far.

Making crypto more accessible for millions of users via @CoinbaseWallet!

We are excited to announce @Transak's integration with @CoinbaseWallet

Buy Crypto from the Philippines
and Thailand
Pay with 10+ local payment methods

https://t.co/3c2TaXnNya pic.twitter.com/Cugvd7VPvx

— Transak (@Transak) December 2, 2022

For more information on their fee structure, you can click here.

3) Ramp

Ramp is a crypto onramp and offramp service that specialises in facilitating in-app crypto purchases for web3 projects. Ramp aggregate multiple local payment methods to offer the best price, UX, and broadest coverage. Users can purchase crypto using debit and credit cards, bank transfers, Apple Pay and Google Pay, with local payment methods in the works.

Why Ramp?

• Security: Ramp is fully non-custodial and audited by an expert at Quantstamp. Registered as a crypto asset business by the FCA.
• Ease of use: Experience the state-of-the-art onboarding process for newbies and pros.
• Smart KYC: Get verified most easily – connect your bank and get your crypto in seconds.
• Competitive rates & fees: The more you buy, the less you pay. Fees start from a mere 0.49%.
• Fastest fiat-to-crypto: Ramp’s instant verification and settlement get your crypto in minutes.

Finally, @RampNetwork also announced the release of one of the fastest and cheapest off-ramps in crypto, with support for 34 assets across 17 different blockchains.

Optimism users in the US can use it to off-ramp $DAI and $ETH.https://t.co/M0vCT4BabW

— Optimism (_) (@optimismFND) December 16, 2022

For more information on their fee structure, you can click here.

4) Banxa

Banxa is a financial technology platform that provides fiat-to-crypto onramp services plus off-ramping services for stablecoins. Banxa offers more global and local payment options than any other on-and-off-ramp solution resulting in conversion rates up to three times higher than credit card-only solutions.

With Banxa, users have access to 79 different cryptocurrencies, including lesser used stablecoins such as USN, SUSD and CUSD.

Banxa announces its partnership with @1inch to create greater access to DeFi assets by tapping into Banxa's global/local payments options. Read more here: https://t.co/C1Vxw6Ukha

— Banxa (@BanxaOfficial) November 29, 2022

5) Mt Pelerin

Mt Pelerin is a non-US, no-KYC crypto onramp based out of Switzerland.

Mt Pelerin offers an ultra-competitive and attractive rate compared to all the other fiat-to-crypto platforms out there. Users get live market prices and the lowest fees with no hidden costs. On top of that, no identification is required, and anyone can purchase their preferred crypto instantly by card or bank transfer.

Users also have the ability to withdraw them at any time in 14 different currencies back to their bank account in one of the 171 countries supported.

Mt Pelerin offers users a feeless purchase for their first CHF500 or equivalent in a year. Above that, a small percentage fee is charged, which can be discounted if you own their native token MPS.

For more information on their fee structure, you can click here.

Conclusion

While centralised exchanges are popular because they provide easy venues for fiat-to-crypto and crypto-to-crypto trading, they can mishandle customers’ funds. Such ease comes at the cost of a custodial relationship where the exchange ultimately controls any funds you choose to store with them.

By the basis of virtue, a CEX should always maintain customer holdings 1:1. The nightmare scenario is a situation like the FTX debacle where SBF’s trading arm commingled customer funds.

Hence, engaging in a fiat-to-crypto platform allows you to have custody over your assets from the get-go. These onramps are compelling because they offer users ways to quickly go from cash to crypto and right to their personal wallets without giving up control of their funds.

It is important to note that these fiat-to-crypto platforms still have centralised elements, and many require to Know Your Customer info. These platforms are great alternatives if you want to get your crypto directly without touching a CEX.

[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]

Featured Image Credit: Chain Debrief

The bear market has brought a time of quiet reflection to investors in the space. Did DeFi fail? Does the Metaverse really have a future? Are trading NFTs just a Ponzi? Is my coin better than any others? What makes or break a project? These are some of the crypto questions VCs might not want to answer or tell you the truth on.

Today, let’s deep dive into a thread warning us on what we as retail investors should be wary of.

Crypto isn't a fair playing field.

The truth is that 99% of "retail" investors are at the behest of the top whales and VCs. So, how can you break the mould?

: Here are 5 things that crypto whales and insiders don't want you to know (but you should).

— Miles Deutscher (@milesdeutscher) May 3, 2022

[Author’s Note: This article was adapted from a tweet by @milesdeuscher, a crypto influencer on Twitter. What you read should be used for educational and learning purposes and does not serve as financial advice.]

1. The Problem With DeFi Tokens

DeFi has worked quite wonderfully and reliably for its users. Lending, borrowing, trading spot on a DEX, or even trading synthetic assets or derivatives have been a solid demonstration of what decentralized financial products on-chain are like.

However, one key structural problem exists with DeFi platforms. It is, in my opinion, an open secret: where do the tokens fit in?

In DeFi, liquidity mining rewards exist for a reason: it serves to bootstrap the ecosystem by attracting total value locked and more liquidity, thus allowing it to generate some revenue – e.g borrowing fees, vault management fees, trading fees. But what happens after the bootstrap phase?

Miles argues that while tokens are a good way for decentralizing governance and enable a secondary market, most of these tokens are simply unnecessary.

Tokens that do not capture value long term and earn a piece of the protocol’s revenue are valueless and ultimately dump hard once the hype from farming fades away.

Miles also raises a good point on DeFi token emissions: while these are attractive as initial rewards with high APR, they gradually enter the circulating supply and due to inflationary pressures, cause the value to plummet over time.

2. Bullish Crypto Unlocks by VCs? Think Again

2021 is a story of bullish unlocks

— Zhu Su (@zhusu) January 7, 2021

In general for projects, VCs and private rounds get into these tokens at massive discounts during seed rounds or private rounds. Here are some details on the private rounds for the following L1s:

• SOL: $0.04
• FTM: $0.043
• AVAX: $0.50
• BNB: $0.15

Most of us retail forget that the market price might fall 50% from your initial entry, but private investors might still be up many times and in heavy profit.

The bullish unlock meme which worked in the past is unlikely to happen in the bear market as massive unlocks happen and private investors want to realize their gains and minimize their losses in a market downturn.

In fact, you should look at the portion of the supply that is unlocked and how steep the “cliffs” are when circulating supply increases.

Consider that token unlocks could also occur alongside protocol emissions, leading to a rapid increase in circulating supply over time.

And when the musical chairs stop and everyone is rushing for the exits, will the market demand be able to support current valuations?

$dydx down 92% and still $2bn+ FDV

2022-2023 will be a rough year for altcoins, people will start to understand the importance of FDV’s.

— Algod (@AlgodTrading) May 21, 2022

3. Lack Of Product

Miles’ next criticisms can be broadly applied to the wider crypto market, but is most apparent among Metaverse projects and “GameFi” – many of these projects have massive valuations (>$100m) without any actual game/NFT released or any form of actual revenue back to the holder.

While the market is pricing in future growth, how does this apply in a bear market where growth becomes relatively stagnant and unlocks on token supply start happening?

Personally, NFTs and GameFi have been a good exposure for beginners to enter the market and take a look at what blockchain offers. However, we still have a long road ahead, and I just do not agree with the fact that gaming projects that have not created a strong use-case for its token can be worth hundreds of millions of dollars.

4. APRs are meant to incentivise liquidity

In the real world, when companies first launch they often offer promotions to incentivise people to spend money/grow accustomed to their product.

In crypto, instead of incentivising via discounts, DeFi projects use token emissions to incentivise early liquidity.

This model has worked very successfully for the likes of $LUNA (via @anchor_protocol) and @CurveFinance as claimed by Miles.

However, these emissions end up being their downfall. Often times, the tokenomics lead to over dilution and a huge increase in circulating supply.

The question still stands, “what happens when emissions run out?” Well, protocols will need to pivot from incentivising liquidity towards incentivising fees.

Holders should primarily generate a return via fees, not emissions.

5. Crypto Whale/VCs Movements

For this section, Miles gives the age old adage by Warren Buffet: “Be fearful when others are greedy, and greedy when others are fearful.”

Whale holdings are roughly inversely correlated to price, and they tend to accumulate when the market is in max fear, and sell when people are too greedy.

This suggestion does make sense and highlights that most of us retail are often just small fishes in the sea – we often tend to ride the trends of what they are doing and most of the time, end up as exit liquidity.

To me, looking at on-chain data and what wallets are doing is just one part of a strategy you should employ. Furthermore, their accumulation and holdings might not paint the exact picture of what they are actually doing.

You should be aware that whales are just like you, and often, funds and whales do blow up and they can be wrong.

Solutions for retail

So far we have the following problems:

• Farming tokens are inflationary and (usually) valueless. Your holdings are eventually diluted.
• Token unlocks are significant in bear market
• Lack of actual product/delivery compared to funds raised

Does the team have a track record? Who are the investors? Is the current valuation reasonable compared to other projects in the same category?

Examining tokenomics is also important. Here are the following suggested from Miles’ tweets:

• Projects that generate real revenue from fees compared to emissions
• Revenue flows back to holder (a.k.a token value accrual)
• Tangible user growth
• Do not blindly chase yield

Closing Thoughts

I featured this tweet in the article as it highlights some very obvious incentive problems in crypto, and these weaknesses become very apparent in the bear market.

Of course, talking about it during the bull run is usually ineffective as number go up and people that stay in the sidelines apparently have fun staying poor.

It also does not seem clear to me (so far) what the best token value accrual mechanics are, and how exactly do certain projects and alts justify their prices once demand starts to fall off. Finding that one project or protocol that has strong incentive structures tied to their token, and can be sustainable in the long run is my goal in this current climate.

I always take a default stance of skepticism and believe that having strong critical opinions on a project and helps to filter out bad projects before I make a decision. Hopefully this tweet helps you the same way as it did for me – until then, do your own research, and survive.

[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]

Featured Image Credit: Chain Debrief

Also Read: House Money Effect: 4 Mistakes That Crypto Investors Will Fall Prey To

In crypto, public blockchains are permissionless and every on-chain transaction is recorded and stored on the public ledger. This article will talk about several on-chain analytics tools in crypto readily accessible for you.

For instance, all the transactions on the Ethereum blockchain are all stored on the blockchain for everyone to see. Every swap and every NFT purchase can be tracked on-chain.

With that said, there’s no better place to get alphas than on the chain itself. Everyone wants to be an on-chain wizard but not many know where to start and what tools to use.

Without further ado, here are the top 5 tools that will turn you into an on-chain wizard:

1. Etherscan

Etherscan is a blockchain explorer for the Ethereum network. The website allows you to search through transactions, blocks, wallet addresses, smart contracts, and other on-chain data.

On the surface, Etherscan is just a block explorer that normies use to look at transactions. But deep down, Etherscan can be used for a variety of functions from making transactions to reading token data.

I think the best function of Etherscan is the ability to make transactions on it. It is easy to use and users can bypass buggy websites & crappy UI to interact directly with the smart contract.

Want to master Etherscan? Here Are 10 Ways To Master Etherscan And Discover The Next Crypto Alpha Before Everyone Else

2. Debank

Debank is an all-in-one cryptocurrency portfolio tracker designed to manage DeFi assets.

Debank allows users to track their full portfolio through various chains, compare interest rates, manage assets, find DeFi projects, analyze risks, and enable users to perform token swaps on token exchange.

The simple and user-friendly interface also makes it easy to track whale wallets and their activities. With a click on the button, you can see a detailed breakdown of their portfolio and holdings.

Read More: Crypto Scams Took 14 Billion USD In 2021 – How To Prevent Your Funds From Getting Stolen

3. Nansen

Nansen is a Singapore-based blockchain analytics platform that combines on-chain data with a massive database containing millions of wallet labels.

“Nansen is currently the best on-chain analytics tool available on the market. It is my go-to dataset when attempting to dissect on-chain movements and to the learned eye, contains plentiful bouts of alpha. Definitely a must-use for crypto professionals”

Wangarian – DeFiance Capital

Nansen comes with an endless list of features and dashboards. Token God Mode, Smart Money and Hot Contracts are some of the most popular features of Nansen.

The on-chain data platform just acquired Ape Board, one of the top portfolio tracker platform, for over US$10 million. It plans to incorporated it into its upcoming all-in-one super app.

Nansen just released a new lite version for free. Read more about it here: Crypto Analytics For Free: How To Use Nansen’s New Lite Version Of Its Analytics Platform

4. Dune Analytics

Dune Analytics is by far one of my favourite on-chain analytic tools. It is a powerful tool for blockchain research. It offers on-chain analytics dashboard for both technical and non-technical investors.

Dune gives you all the tools to query, extract, and visualize vast amounts of data from the blockchain, unlocking the power of public blockchain data by making it accessible to everyone.

The beauty of Dune is the flexibility it offers. There are thousands of different dashboards made by the community and some of the dashboards offer great insight into the on-chain activities.

5. Excel

Bet you’re not expecting to see Excel on this list but Excel is actually able to help with wallet tracking.

Basic Excel functions like VLOOKUP will help to make your life easier when scanning through thousands and thousands of transactions.

Rather than manually filtering, there is an in-built filter button on Excel that is also able to filter out all the unwanted or erroneous data.

Here is a more detailed step by step guide by StrategicHash on how to use excel for wallet tracking:

How to track influencer wallet addresses – NO python, NO API calls, NO coding needed. Only prerequisite is excel

— StrategicHash (@StrategicHash) April 14, 2022

Closing thoughts

Mastering these 5 tools would definitely help you level up your game and give you an edge over the other crypto newbies.

And the best of all, all these tools are free! All you have to do is to set some time aside to master these tools and incorporate them into your due diligence process. If done correctly, you will be finding alphas before they are up on Twitter.

Anyway, we have a whole list of crypto tools on our website. You can check them out over here.

[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]

Featured Image Credit: Chain Debrief

Also Read: Your First Step Into The Crypto World: Top 10 Free Crypto Tools

Keeping the crypto you just bought on centralised exchange (CEX) is the easiest way to hold your token. But is it truly safe?

In 2021 alone, there were been more than 20 hacks on centralised exchanges, where hackers walked away with at least US$10 million.

A recent, high-profile hack saw Singapore based Crypto.com losing over US$30 million in Bitcoin and Ethereum.

Though Crypto.com made moves to repay all the funds and beef up its privacy and safety protocols, not all centralised exchanges will bear the losses.

Thus, cryptocurrency wallets can provide more protection but it is a bit more complicated. Cryptocurrency wallets can be categorised into two main types — hot and cold wallets.

Hot wallets explained

A hot wallet is a form of software wallet that is connected to the Internet. It can come in many forms from web-based wallets to mobile wallets. The best thing of all is that hot wallets are free!

In the event that you want to venture out and explore what decentralised finance (DeFi) has to offer, the most convenient way to interact with decentralized applications (dApps) is via a hot wallet.

Funds on hot wallets are also easily accessible and there is no need to transition between offline and online to make a transaction.

Cold wallets, on the other hand, would require users to transfer the funds into a hot wallet before they are able to make a transaction.

Do note that because hot wallets are connected to the Internet, they are still vulnerable to digital attacks.

MetaMask

Without a doubt, MetaMask is the most popular digital wallet in the crypto space with over 21 million users worldwide. There is even a swap function that allows users to swap tokens with ease.

It doesn’t end on the Ethereum blockchain. MetaMask also allows users to tap onto the Binance Smart Chain network to store and transact using BEP-20 tokens. It also supports other layer 2 networks like Polygon and Fantom.

Phantom

Phantom is the number one crypto wallet on the Solana blockchain. Similar to MetaMask, it is a non-custodial digital wallet and is installed like a regular plugin.

There is an inbuilt gallery where users can see their NFT straight from the wallet. Phantom also just released an IOS version so iPhone users can easily access Phantom from their mobile devices.

Cold wallets explained

Cold wallets or cold storage is a physical device that is able to store cryptocurrencies completely offline. Many come in the form of a USB stick and can range from US$30 to over US$200.

Because the device is able to store crypto offline, it can protect the investment from online hacks and digital attacks.

There is a trade-off between accessibility and security as cold wallets are less convenient because the device must be connected to the Internet before any transaction can be made.

Most established CEXs will use a combination of hot and cold wallets. They will store majority of their fund in a cold wallet and only just enough liquidity in a hot wallet to service withdrawal transactions. This will ensure that majority of the fund are kept safe and sound.

Only buy cold wallet from an authorised dealer as second-hand device might be tampered with.

Ledger

Ledger is by far one of the most popular cold wallets in the world. Its most popular product — the Ledger Nano S has sold over one million units worldwide. The wallets are equipped with industry-leading security to help keep crypto assets secure at all times.

It is also ready to launch their very own crypto debit card called the Crypto Life card. It is scheduled to launch in UK, France and Germany in Q1 of 2022 and would start to roll out in the US in Q2 of 2022.

Trezor

Trezor was the world’s first hardware wallet ever created. It prides itself on its open-source software and hardware that can be viewed publicly on GitHub.

It is almost impossible to hack as there is no username and password for the account. The credential is the Trezor device itself. This is why it is one of the safest ways to store cryptocurrency.

Wrapping up

In a nutshell, both hot and cold wallets are generally more secure than storing crypto on the CEX. While hot wallet is more user friendly and simpler to use, it is not advisable to hold large amount of crypto on a hot wallet.

It is by far more secure to keep crypto in a cold wallet instead. Even though it is more cumbersome to use. It is a small price to pay for peace of mind.

[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]

Featured Image Credit: Chain Debrief

Also Read: How To Use MetaMask To Take The First Step Into The World Of Decentralized Finance