Exchanges vs. Custodians – What You Need to KnowStaff Writer
Those who want to invest in cryptocurrencies often may not know how to go about doing so. There are undoubtedly many cryptocurrency investors who hit it big in the early days of cryptocurrencies just trading on standard exchanges such as Mt. Gox, keeping their assets in online wallets or stored at exchanges. In the early days of Bitcoin, bitcoins were worth so little that it didn’t make much economic sense to store cryptocurrencies in any special manner.
With the rise in the price of Bitcoin, and with other cryptocurrencies rising alongside it, that began to change things significantly. Instead of a Bitcoin wallet with 100 bitcoins being worth $100, it’s now worth hundreds of thousands of dollars. And with that increase in value comes the need for investors to take their investment’s security more seriously.
Many investors may not understand the need for specialized security. After all, shouldn’t a wallet with an online exchange be sufficient? Well, in an ideal world it should, but this isn’t an ideal world. Exchanges are hacked all the time, and many of them can’t help but lose money to hackers. Others, like the infamous case of Quadriga, are subject to pilfering from insiders who are supposed to protect investor assets but just help themselves instead.
That’s why storing cryptocurrency assets with a custodian is the way to go. For those investing in a cryptocurrency IRA, it’s a necessity. Any assets owned by an IRA have to be stored with a custodian, who provides all the necessary services required to satisfy the conditions established by the Internal Revenue Code. And as it turns out, many of the services that go above and beyond the bare minimum are quite helpful to cryptocurrency investors.
Custodians can offer a range of services, from hard wallets to vault storage, to make sure that your cryptocurrency assets remain free from theft and tampering. In an era in which anyone with a computer and enough knowledge and talent can become a cybercriminal and potentially make off with hundreds of thousands of dollars worth of assets, you can’t be too careful in securing your valuable assets.