Anbruggen Capital on The Pros and Cons of Crypto Custody

Cryptocurrency is a digital currency maintained in a decentralized system rather than traditional government fiat currency, which is managed via a central bank. About 16 percent of US adults have invested in cryptocurrency, according to a Pew Research report. Because cryptocurrency is decentralized, users can store their crypto assets themselves. However, doing so is seldom the best option. Using a third-party crypto custodian is often more convenient and safe.

Pros of Having a Cryptocurrency Custodian

Here are some reasons to use a cryptocurrency custodian.

You must stay in compliance 

Institutional investors with customer assets of $150,000 or more must store them with a regulated custodian. According to the Securities and Exchange Commission, regulated custodians are banks, savings associations, and registered broker-dealers.

You don’t like dealing with technology

You must set up your own wallet if you don’t use a crypto custodian. Setting up a crypto wallet requires some technological savvy.

 First, you must decide whether you want a software wallet or a “hot wallet’ that stores crypto online or a “cold wallet” or hardware wallet that stores your currency offline. If you choose a “hot wallet,” you’ll download the app and create an account. The app will provide you with a recovery or seed phrase. If you forget the seed phrase, you won’t be able to access your money. If you write down your seed phrase and someone else finds it, they can access your cryptocurrency. A hot wallet typically makes trading crypto fast but can be vulnerable to attacks.

If you choose a “cold wallet,” you must buy the hardware and download its accompanying software. Then you’ll connect the hardware to your computer. You’ll still need to remember a recovery phrase if you lose your hardware wallet, and trading is slower than a cold wallet. However, a hardware wallet is less vulnerable to attacks.

You are a business

A crypto custodian allows you to distribute responsibilities to several different team members and set limits for each of them. Setting up your own wallet does not allow for this scenario.

Cons of Having A Cryptocurrency Custodian

The only disadvantage to having a cryptocurrency custodian is that you must trust the custodian to keep your assets secure and make them available to trade when you want them.

Anbruggen Capital and Crypto

Anbruggen.Capital is a trading and investment firm. Its team has traded in crypto since 2013 and uses systematic research and analysis to invest and trade digital assets.