Crypto wallets store the private keys that users need to be able to access their cryptocurrency holdings. There are some instances where having a single wallet is perfectly fine – if you only have a modest crypto portfolio, for example. But if you regularly add to your holdings, store a wide variety of different cryptos that use different networks, or have a large amount of any cryptocurrency, it is prudent to have multiple wallets.
Having multiple wallets does increase admin, but it prevents you from losing everything in the event of a lost password or a discarded wallet. It also prevents hackers and thieves from seeing the full extent of your cryptocurrency portfolio.
Crypto Wallets
There are many crypto wallet options available to the modern cryptocurrency adopter, and the most recent products include advanced features like multi-signature support, biometric authentication, and Dapp integration. For many, the most important aspects when choosing wallets, though, are ease of use and compatibility with their chosen crypto.
Whether users spend crypto at ecommerce stores, send currency overseas to friends and family, or use Metamask casinos to enjoy the privacy, security, and generous bonuses they offer, compatibility matters. According to cryptocurrency experts, Metamask is compatible with Ethereum and other Ethereum-compatible networks, which makes it a popular option with a lot of users.
The Risks Of Keeping A Single Wallet
There are hundreds, if not thousands, of different wallets available for users to download. And, while a user who holds a single coin or multiple coins that use the same network, might be able to store all of their currency on a single wallet, those who have diverse portfolios of crypto assets need multiple wallets.
A lot of users also choose to use multiple wallets because of the added security and privacy it offers. Keeping a single wallet does pose certain risks.
Hefty Wallets Draw Attention
Although cryptocurrency is generally described as being anonymous, this isn’t necessarily true. Wallets and transactions don’t submit personally identifiable information like name, address, or social security number. They do send transaction details and the address of the sender’s and recipient’s wallets.
Because blockchain records are publicly accessible, this means anybody can view transactions, and with some digging, it is possible to determine how much cryptocurrency a single wallet has by monitoring its incoming and outgoing transactions. And many people monitor the biggest wallets for signs of movement or to get some clue as to who owns the wallets. Lists of the biggest crypto wallets are curated, and they can be accessed online.
Today, the owners of many of the 100 largest Bitcoin wallet addresses are not only known but are published online, and this practice isn’t reserved solely for the very largest wallets. If you have a reasonable amount of crypto in a single wallet, there’s a chance that the wallet is being monitored and transactions are being recorded.
Although difficult, third parties can and do gain access to crypto wallets, enabling them to divert the holdings to their own wallets. And it isn’t just hackers and thieves who might use the information.
Governments, government agencies, and law enforcement bodies are also known to watch wallet addresses. Having multiple wallets enables a user to spread their holding across several addresses, making them less conspicuous and ensuring greater privacy.
A Lost Password
Wallets need to be secure to prevent crypto from going missing or being stolen. This means they typically require the use of long and complex passwords, especially if you are following crypto wallet best security practices.
When registering a wallet, users are typically provided with a seed phrase that can be used to regain access to a wallet even if a password is lost, but this isn’t always the case, and if a user loses their password and doesn’t have access to their seed phrase, they will lose access to the cryptocurrency they own forever.
Beyond seed phrases, the odds of password recovery are almost impossibly high. Splitting a crypto portfolio into multiple pots and storing each one in different wallets, not just using different wallet addresses in the same wallet, mitigates some of this loss. The user could still lose a good portion of their portfolio, but they should still have access to the rest of their money.
Discarded And Lost Wallets
As well as losing passwords, it is possible to physically lose wallets themselves. Hardware wallets are small devices, with some of them similar in size to flash drives. This makes them easy to store, but it also makes them easy to lose.
If a software wallet is deleted, reinstalling it and using a password or recovery phrase should enable the user to regain access, but losing a hard drive, or if a hard drive containing a software wallet completely fails, it can prove more difficult. There are multiple cases of people losing access to cryptocurrency worth millions of dollars.
In another instance, one man has lost multiple appeals to a local council to dig up and attempt to recover a discarded hard drive from his local landfill. This not only shows the importance of having multiple wallets but also having different types of wallets stored on different devices and in different locations, if you have a large amount of cryptocurrencies.
Crypto Transfers Can Cause Market Movements
Another possible consequence of holding a lot of cryptocurrency in a single wallet is that any movement of that cryptocurrency could cause market movements, which, in turn, could lead to the inadvertent loss of value of that cryptocurrency.
While this would require the movement of a substantial amount of Bitcoin or even Ether, smaller coins have much smaller market capitalizations. Some smaller tokens and meme coins only have a total capitalization of hundreds of thousands of dollars.
If analysts and market watchers who monitor blockchain movements notice a wallet move a decent portion of crypto, it could make them nervous, leading to a fire sale of the token. And once this kind of sell-off starts, it tends to be self-perpetuating, potentially leading to a huge decrease in coin value.
Holding multiple different cryptocurrencies in different wallets enables users to be able to freely move their currencies around without causing market movements or derailing their own investment efforts.
How Many Wallets Can You Have?
Strictly speaking, there is no limit to the number of crypto wallets an individual can have. And, considering some wallets allow the creation of multiple addresses, this makes it possible for users to have dozens of different wallet addresses.
While having multiple wallet addresses can protect a user’s crypto holdings and identity, and can also make it easier to manage funds and funding, it can also get confusing.
How Many Wallets Should You Have?
If your crypto portfolio is worth a few hundred dollars or less, you will likely be fine with a single wallet and a single address, unless you need multiple wallets to access different blockchain networks.
On the other hand, if your portfolio is much larger than this, consisting of thousands of dollars, or making up a decent portion of your total wealth, having at least two wallets is a sensible idea. The larger your portfolio, the more wallets you might want to consider.
Wallets And Other Crypto Storage Solutions
Having multiple wallets is a more secure way to store moderate to large cryptocurrency portfolios, but even having multiple wallets on a single hard drive or mobile device is considered risky. Fortunately, there are different storage solutions and types of wallets that can be used.
Software
Software wallets are usually installed on desktop computers or mobile phones. They offer easy access and convenience, are more secure than leaving your crypto on exchanges or online accounts, and can include advanced security features. However, hot wallets are not considered the most secure option.
Hardware
Hardware wallets are physical devices. They do not connect directly to the Internet and set up a buffer so that when you make and receive crypto payments, details are never shared online or via a device that is online. Hardware wallets are more secure than software wallets, although they do have their own risks and downsides, not least the fact that they tend to be less convenient than software wallets.
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