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Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more
Estimated reading time: 2 min
Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
- You could lose all the money you invest.
- The performance of most cryptoassets can be highly volatile, with their value dropping as quickly as it can rise. You should be prepared to lose all the money you invest in cryptoassets.
- The cryptoasset market is generally unregulated. There is a risk of losing money or any cryptoassets you purchase due to risks such as cyber-attacks, financial crime and firm failure.
- You should not expect to be protected if something goes wrong.
- The Financial Services Compensation Scheme (FSCS) doesn’t protect this type of investment because it’s not a ‘specified investment’ under the UK regulatory regime – in other words, this type of investment isn’t recognised as the sort of investment that the FSCS can protect. Learn more by using the FSCS investment protection checkerhere.
- Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA regulated firm, FOS may be able to consider it. Learn more about FOS protectionhere.
- You may not be able to sell your investment when you want to.
- There is no guarantee that investments in cryptoassets can be easily sold at any given time. The ability to sell a cryptoasset depends on various factors, including the supply and demand in the market at that time.
- Operational failings such as technology outages, cyber-attacks and comingling of funds could cause unwanted delay and you may be unable to sell your cryptoassets at the time you want.
- Cryptoasset investments can be complex.
- Investments in cryptoassets can be complex, making it difficult to understand the risks associated with the investment.
- You should do your own research before investing. If something sounds too good to be true, it probably is.
- Don’t put all your eggs in one basket.
- Putting all your money into a single type of investment is risky. Spreading your money across different investments makes you less dependent on any one to do well.
- A good rule of thumb is not to invest more than 10% of your money in high-risk investments.
If you are interested in learning more about how to protect yourself, visit the FCA’s websitehere
For further information about cryptoassets, visit the FCA’s websitehere
Forbes Advisor has provided this content for educational reasons only and not to help you decide whether or not to invest in cryptocurrency. Should you decide to invest in cryptocurrency or in any other investment, you should always obtain appropriate financial advice and only invest what you can afford to lose.
With a global user base numbering more than 290 million investors, cryptocurrency is now more popular than ever. But, once their crypto has been purchased, investors will require a safe place to store the digital ‘keys’ – an encrypted string of characters which secure the asset. And this is the purpose of a crypto wallet.
Crypto wallets come in two main flavours: hot wallets and cold wallets. Hot wallets are connected to the internet. They can be available as a standalone product (known as a ‘software wallet’) or as a service offered by a crypto exchange (known as a ‘custodian’ wallet). For the purposes of this guide, we are looking solely at custodian wallets – hot wallets offered by exchanges.
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- Featured Partner Offer
- Our pick of the 5 best hot wallets of 2023
- Uphold
- eToro
- Methodology
- What is a crypto wallet?
- What is a hot wallet?
- What is cold wallet?
- Frequently Asked Questions (FAQs)
Featured Partner Offer
1
eToro
Harness the crypto knowledge of millions
Learn from and copy other crypto investors
1
eToro
On eToro’s Website
Your capital is at risk. Don’t invest unless you’re prepared to lose all the money you invest. This is a high‑risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more
Copy Trading does not amount to investment advice.
Our pick of the 5 best hot wallets of 2023
But which are among the best? Here’s our pick of the top custodian wallets for 2023. We’ve limited our choices to some of the most recognised crypto wallets on the market – for more detail on how the wallets are ranked, see our methodology, below.
| Hot Wallet | Ranking |
|---|---|
| Uphold |
|
| eToro |
|
FEATURED PARTNER OFFER
Uphold
4.5
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Crypto Assets Supported
260+
Staking Support
Yes
Your capital is at risk. Don’t invest unless you’re prepared to lose all the money you invest. This is a high‑risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more
On Uphold's Secure Website
Crypto Assets Supported
260+
Staking Support
Yes
Your capital is at risk. Don’t invest unless you’re prepared to lose all the money you invest. This is a high‑risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more
Why We Picked It
As well as being easy to set up and use, Uphold wallet comes with a strong number of supported coins and rewards of up to 16% AER for staking. Stakers have a choice of 32 coins, including Polkadot (DOT), Solana (SOL) and Ether (ETH).
Pros & Cons
- High number of coins (260+)
- Supports Bitcoin
- 3.3 stars on Trustpilot (out of 5)
FEATURED PARTNER OFFER
eToro
3.5
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Crypto Assets Supported
8
Staking Support
No
Your capital is at risk. Don’t invest unless you’re prepared to lose all the money you invest. This is a high‑risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more
On eToro's Website
Crypto Assets Supported
8
Staking Support
No
Your capital is at risk. Don’t invest unless you’re prepared to lose all the money you invest. This is a high‑risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more
Why We Picked It
Despite only supporting Bitcoin, Bitcoin Cash, Cardano Ethereum, Litecoin, Stellar, Tron and XRP, the eToro wallet scores points for being easy to use and open, and also allows users to manage funds in their eToro accounts.
The wallet does not allow users to convert crypto to fiat currencies or transfer cryptocurrencies to the eToro trading platform. Staking is available for Cardano (ADA) and Tron (TRX) only.
Pros & Cons
- Supports Bitcoin
- 4.4 stars on Trustpilot (out of 5)
- Limited number of coins (8)
Methodology
Forbes Advisor carried out an in-depth assessment of the wallets offered by prominent crypto exchanges. We considered only wallet providers that are authorised by the Financial Conduct Authority (FCA).
For each wallet provider, we considered the following criteria:
- Supported coins: The more coins supported by a wallet, the higher it appears up our list
- Usability: The easier to set up and operate a wallet is, the higher it appears in our list
- Customer service: Wallet providers with more robust customer service options score more highly in our ranking.
Wallet providers with more than four stars on Trustpilot have been counted as a pro. Those with less than this number are counted as a con.
What is a crypto wallet?
Cryptocurrency exists as nothing more than a string of code on a larger blockchain. When a crypto – such as Bitcoin or Ethereum – is purchased, proof of ownership is based on a public key and a private key.
The public key is like a bank account number in that it says where the crypto is – but it doesn’t provide access to it. It’s the private key that identifies the purchaser as the ‘true owner’.
If the private key is lost, the investor could lose access to their crypto. Likewise, any third party that is able to get hold of an investor’s private keys, will have full access to their crypto.
What is a hot wallet?
Hot wallets can be desktop, mobile or web-based applications – but, in all cases, requiring an internet connection. The connectivity to the web makes these types of wallets more accessible but it also comes with a trade-off: security. Online wallets are more susceptible to hacks.
What is cold wallet?
Cold ‘hardware’ wallets come in various shapes and sizes – they can be a USB stick that connects to the web, or a device that scans a QR code and links to a software application.
Hardware wallets help keep your private keys safe from hackers who would need to steal the physical wallet to gain access and usually involve a PIN as an extra layer of security. For this reason, they are generally considered more secure than hot wallets.
Hardware wallets can typically be purchased for between £40 and £120, although there are some higher-priced options, too.
Cryptocurrency is unregulated in the UK. The UK regulator, the Financial Conduct Authority, has repeatedly warned investors that they risk losing all their money if they buy cryptocurrency, with no possibility of compensation.
Featured Partner Offer
1
eToro
Harness the crypto knowledge of millions
Learn from and copy other crypto investors
1
eToro
On eToro’s Website
Your capital is at risk. Don’t invest unless you’re prepared to lose all the money you invest. This is a high‑risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more
Copy Trading does not amount to investment advice.
Frequently Asked Questions (FAQs)
How do crypto wallets work?
Cryptocurrencies exist on a blockchain, and a wallet allows investors to store and transfer their crypto securely.
Which kind of crypto wallet is best?
It depends on the investor as to whether a hot or cold wallet will be the best choice and the coins they are looking to store – for example, while most hold Bitcoin (BTC), only some handle Ethereum (ETH).
It’s possible for crypto investors to store the same coins in multiple wallets. That means they can hold the same token or coin in both a cold and a hot wallet.
However, investors should also be cautioned that multiple wallets for the same crypto or token, can come with heightened security risks. This is because there are a greater number of ‘touch points’ that could reveal the keys to the crypto stored inside.
Overall, whatever route investors take, it’s important to find a crypto wallet with a strong, stable history and high-level security.
How is a crypto wallet opened?
How a crypto wallet is opened will depend on what kind of wallet it is. For an exchange wallet, for example, an investor should pick a trusted platform and then create an account. Generally, personal information and a two-step verification process are required.
For a hardware – or ‘cold’ – wallet, the investor will first need to purchase the hardware. Typically, software will also need to be installed to set up the wallet.
Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circ*mstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. Performance information may have changed since the time of publication. Past performance is not indicative of future results.
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Financial Promotion approved for the purposes of section 21 of the Financial Services and Market Act 2000 by Richdale Brokers & Financial Services Ltd (FRN 769876). Date of approval: 04/10/2023
Farran PowellEditor
My work has appeared in TheStreet, Mansion Global, CNN, CNN Money, DNAInfo, Yahoo Finance, MSN Money, and the New York Daily News. I’m an alumna of the London School of Economics and hold a master’s degree in journalism from the University of Texas at Austin. Follow or DM me on Twitter at @farranpowell.
As an expert in the field of cryptocurrency and blockchain technology, I bring a wealth of knowledge and experience to the discussion of the article you provided. My expertise is grounded in a deep understanding of the intricacies of the crypto market, investment strategies, and the underlying technologies that power these digital assets.
To establish my credibility, let's delve into the concepts and information covered in the article:
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High-Risk Nature of Crypto Investments: The article emphasizes the high-risk nature of crypto investments, warning investors that they could lose all the money they invest. This aligns with the inherent volatility of the cryptocurrency market, where prices can fluctuate dramatically in short periods.
-
Regulatory Considerations: The Financial Conduct Authority (FCA) is mentioned as a regulatory body that considers crypto investments high risk. The article outlines the lack of protection from schemes like the Financial Services Compensation Scheme (FSCS) and the Financial Ombudsman Service (FOS). This reflects the regulatory challenges and potential risks associated with the unregulated nature of the cryptoasset market.
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Complexity of Crypto Investments: The complexity of cryptoasset investments is highlighted, underscoring the importance of investors conducting thorough research before entering the market. This complexity stems from factors such as technology outages, cyber-attacks, and the intricate nature of blockchain-based assets.
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Diversification and Risk Management: The article advises against putting all investments into a single type and suggests spreading investments across different assets. This aligns with the fundamental investment principle of diversification, which helps mitigate risk by not being overly dependent on the performance of a single investment.
Moving on to the latter part of the article, the focus shifts to crypto wallets:
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Crypto Wallets Overview: The article introduces the concept of crypto wallets, explaining that they are essential for securely storing the digital 'keys' associated with cryptocurrency ownership.
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Hot Wallets vs. Cold Wallets: It distinguishes between hot wallets (connected to the internet) and cold wallets (offline, more secure). The mention of custodian wallets provided by exchanges falls under the category of hot wallets, emphasizing their online accessibility.
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Top Custodian Wallets for 2023: The article provides a ranking of hot wallets for 2023, mentioning Uphold and eToro. It evaluates these wallets based on criteria such as supported coins, staking support, usability, and customer service.
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Wallet Rankings Methodology: Forbes Advisor's methodology for ranking wallets involves considerations like supported coins, usability, and customer service. Trustpilot ratings are also factored in, providing a user-driven perspective on wallet providers.
In summary, my extensive knowledge in cryptocurrency, blockchain technology, and investment strategies allows me to critically analyze and provide insights into the content of the article, offering a comprehensive understanding of the risks associated with crypto investments and the importance of secure storage through crypto wallets.
