Which Crypto Storage Method is Most Commonly Used?
Hot wallets are the most popular way for crypto holders to store their funds. 8 out of 10 people use hot wallets, according to a recent survey of crypto holders. This points to a meaningful level of crypto holders practicing self-custody, after the collapse of a former leading centralized crypto exchange FTX and the mass withdrawals from centralized exchanges.
The widespread usage of hot wallets might also be driven by the popularity of NFTs among crypto holders. Participants usually need hot wallets like MetaMask, in order to mint, transfer, or buy and sell NFTs.
Self-Custody vs Custodial Crypto Storage
However, 7 out of 10 continue to store their crypto on centralized exchanges. The trend is in line with the current dominance of centralized exchanges over decentralized exchanges. Most crypto holders remain reliant on centralized exchanges for on- and off-ramping as well as for buying and selling crypto, such that holders prioritize convenience over security.
Meanwhile, only 3 out of 10 do not use centralized exchanges for crypto storage. The number represents crypto holders who are wary of leaving their funds in third-party custody or perhaps no longer use the services of centralized exchanges.
While the FTX collapse raised awareness about the risks of custodial entities, crypto holders are still unwilling or unable to completely switch away from storing their funds in centralized exchanges.
Are Crypto Holders Using Cold Wallets?
Cold wallets are not commonly used, despite being one of the safest ways for cryptocurrency storage. Just 3 out of 10 people use cold wallets to store their crypto, pointing to poor crypto cybersecurity practices.
Instead, crypto holders mostly prefer to use hot wallets or centralized exchanges for storage. This comes even as crypto hacks reached a ten-year high of $2.8 billion in 2022, including the Solana Slope wallet attack that led to user losses of $5.2 million.
The low usage of cold wallets also indicates that crypto adoption is still at an early stage, with most participants only engaging in easier-to-understand activities that have a lower barrier of entry or significant incentives. As cybersecurity awareness increases and crypto holders become more on-chain native, using cold storage wallets will hopefully become a common practice.
Methodology
The study examined 421 responses from the NFT and Crypto Users Survey, jointly conducted by CoinGecko and Blockchain Research Lab from December 2022 to January 2023.
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Curious to find out more about our previous research studies? Check out this one we did on where exchanges are incorporated.
Yuqian is a crypto research analyst at CoinGecko, covering a range of topics from NFTs to ETFs, crypto adoption and interest, and beyond. She's especially fascinated by the philosophical and socioeconomic aspects of crypto. She holds a Bachelor of Social Sciences with Honors from the National University of Singapore. Follow the author on Twitter @solosbrqt
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