How to store large amounts of money in cryptocurrency?

Electronic money has long been an important element of the financial landscape. However, storing large sums in cryptocurrency presents new challenges for investors. Compared to traditional financial instruments, cryptocurrencies are not controlled by central banks, meaning that issues of security and long-term storage become a priority.

How can large sums in cryptocurrency be stored to minimize risks and maximize the security of your assets? Let's look at the main recommendations.

1. Cold storage

One of the safest ways to store cryptocurrency is cold storage. This method stores private keys offline, significantly reducing the likelihood of their leakage through hacker attacks or malicious software. 

Popular cold storage devices:

• Hardware Wallets: Devices like Ledger Nano X, Trezor Model T allow you to store cryptocurrencies without an internet connection. They store your private keys in a secure environment, and for transaction confirmation, they require physical connection to a computer or smartphone.
• Paper Wallets: This is another cold storage method where all private keys and cryptocurrency addresses are printed on paper. It is an offline method that requires great caution due to the risk of loss or destruction of the paper medium.

These methods allow assets to be stored without direct risk from online threats, but it is important to remember that losing physical access to private keys may result in the irreversible loss of cryptocurrency.

2. Hot wallets

For those who want quick access to their assets, hot wallets are a good option. They are connected to the internet, allowing instant transactions from anywhere in the world, but this access comes with risks.

Popular hot wallets:

• Software Wallets: These are programs for desktop PCs or mobile phones that store private keys. Examples include Exodus, Electrum, Trust Wallet, and MetaMask.
• Exchange Wallets: For example, on platforms like Binance or Kraken, you can store cryptocurrencies directly on exchange accounts. However, this also increases risks as you rely on the security of the exchange itself.

For large sums on hot wallets, you can use additional security measures such as two-factor authentication (2FA) and regular password updates. However, they are not recommended for long-term storage of large amounts of cryptocurrency.

We have already written in more detail about "What types of crypto wallets exist?". 

3. Multi-signature

Another popular strategy for storing large sums of cryptocurrency is using multi-signature wallets. Such a wallet requires multiple signatures to confirm a transaction, not just one private key. This creates an additional barrier for fraudsters, as even if someone gains access to one of the keys, they cannot perform the transaction without the other signatures.

Example: A multi-signature wallet can be set up so that each transaction must be confirmed by two or more participants. This is useful for large investors or organizations where several people are responsible for storing assets.

4. Diversification strategies

As in traditional investing, it is important to diversify assets in the cryptocurrency world. Instead of storing all your funds in one currency or on one wallet, it's better to distribute them among several assets and different storage methods.

Examples of diversification:

• Distribution between multiple wallets (hot and cold wallets).
• Storing funds on different platforms and in different types of cryptocurrencies.
• Using different storage forms, such as hardware wallets and multi-signature systems.

Diversification reduces risks associated with possible attacks on one wallet or platform and also allows for more flexible responses to changes in market conditions.

5. Backup copies and caution

One of the key aspects of security is regular backup of private keys. This will allow you to restore access to your assets in case of loss of the device or damage to the wallet.

Main recommendations:

• Create backup copies for all important wallets.
• Store copies in several physical locations, such as safes or bank vaults.
• Use encryption for additional security of backup copies.

Remember that access to backup copies should only be available to you or trusted individuals to avoid asset theft.

Conclusion

Storing large sums in digital assets requires careful planning and caution. Thoughtful strategies and constant security monitoring will help minimize risks and ensure the reliable long-term storage of cryptocurrency.