Cryptocurrency investors face many decisions, but one of the most crucial is how to store their assets securely. The most widely used storage method is crypto wallets, which come in two main types: hot wallets and cold wallets. Each serves a different purpose, and choosing the right one depends on your investment strategy and security needs. 

In this guide, we’ll deep dive into how crypto wallets work, break down the differences between hot and cold wallets, and compare their advantages and disadvantages. 

What Is a Crypto Wallet?

Unlike traditional wallets that are designed to hold physical cash or cards, crypto wallets don’t literally “hold” bitcoins or tokens—those assets exist solely as entries on a blockchain ledger and never physically move. Instead, crypto wallets store the cryptographic keys that control access to those assets—most importantly, the private key, which must be kept secure. 

Private keys are unique codes that allow the user to store, send, and receive cryptocurrency securely. Only a person who knows the private key can send the associated cryptocurrency to another owner, and once a private key is lost or stolen, no third party can recover it.

Crypto wallets can take physical forms—like hardware devices or cards—but they can also exist entirely in digital formats, such as apps or software programs.  Whichever type you choose, it's vital to keep it secure—losing access could mean losing your digital assets forever.

Types of Crypto Wallets: Hot vs. Cold

Hot Wallets

Hot wallets are software-based and always connected to the internet. They’re actively accessible, making them convenient for quick and everyday transactions. Hot wallets come in several forms:

• Desktop wallets: Installed directly on your computer.
• Mobile wallets: Apps on your smartphone.
• Web wallets: Accessed via a browser, with no installation needed.
• Exchange wallets: Built into cryptocurrency exchanges for quick access.
• Browser extensions: Installed as plugins in your browser.

Many providers offer multiple formats; for example, Trust Wallet has both a mobile app and a browser extension. Other popular hot wallets include MetaMask, Exodus, Coinbase Wallet, and Binance Wallet.

Hot wallets are popular with retail investors and frequent traders. They’re a convenient option for DeFi users, NFT collectors, and businesses that require quick access to funds or interact with smart contracts, as well as anyone who isn't ready or doesn't want to manage a wallet independently. 

However, this convenience comes with risks. Because hot wallets are always online, they’re more vulnerable to hacking, phishing, and malware, making them easy targets for cybercriminals. Exchange-based wallets carry an additional risk: they’re custodial, meaning the exchange—not you—controls your private keys.

On centralized exchanges (CEXs), transactions like buying crypto or sending funds to another user often don’t happen on the blockchain. Instead, they’re internal ledger entries. CEXs operate similarly to traditional banks, managing pooled funds across cold and hot wallets and dispersing them when users request withdrawals. A true blockchain transaction—and actual ownership—only takes place when you withdraw your crypto to a self-custody wallet.

While exchanges offer user-friendly interfaces and regulated fiat on/off ramps, they remain centralized entities, and can suffer from technical failures, hacks, sudden shutdowns, and even exit scams. With custodial wallets, you may have access to your funds—but that access is on someone else’s terms. Understanding these limitations is key to deciding whether a hot wallet suits your needs—or if a more secure, offline option is the better choice.

Cold Wallets

Cold wallets, also known as cold storage, keep your private keys completely offline. They’re typically  self-custodial, meaning users are responsible for their own security and may need to take additional steps to complete transactions. While they lack the convenience of hot wallets, their offline nature provides superior protection against hacking, phishing, and malware. Because they’re disconnected from the internet, they’re considered the most secure way to store cryptocurrency for the long term. They also come in various forms: 

• Hardware wallets: Physical devices that store private keys offline.
• Paper wallets: A printed copy of your private and public keys.
• Air-gapped computers/data drives: Offline, often encrypted devices that never connect to the internet.
• Brain wallets: Your seed phrase or private key is memorized rather than physically  stored anywhere.
• Metal seed phrase storage: Not a wallet itself, but a durable, engraved backup of your seed phrase, often paired with a hardware or software wallet.

Popular hardware wallets include Ledger, Trezor, BitBox, and Ballet. Many offer companion apps that allow you to view balances or prepare transactions while keeping private keys offline.

Cold wallets appeal to anyone who prioritizes security or rarely moves their crypto. They’re ideal for long-term investors (HODLers), crypto institutions, and high-net-worth  individuals holding significant assets. Cold wallets also appeal to those who value control and want full ownership of their keys and funds without relying on a third party.

That said, cold wallets aren’t completely risk-free. To send or receive crypto, they must temporarily connect to an internet-enabled device, at which point they behave like a hot wallet and are briefly exposed to online threats. Because they’re self-custodial, users  take full responsibility for keeping them safe. If you lose your wallet—or your recovery method—you may lose your assets permanently.

Most cold wallets support BIP39, which generates a 12- or 24-word seed phrase for backup and recovery. But these phrases must be carefully protected. If lost or stolen, your funds are as vulnerable as if you’d lost the wallet itself.

While cold storage offers unmatched security, it requires caution, discipline, and thoughtful long-term planning. Use trusted software, avoid risky environments during transactions, and store both your wallet and backups securely.

Pros and Cons of Hot Wallets vs. Cold Wallets

While hot wallets are great for convenience, cold wallets provide unparalleled security for serious investors. Both have their use cases, but understanding which one suits your needs is essential for safeguarding your assets. 

The Benefits of Ballet Cold Wallets

Ballet wallets offer a true cold storage solution—fully offline and completely free from electronic vulnerabilities. Unlike hot wallets that are constantly connected to the internet, Ballet’s non-electronic design eliminates risks like SIM swaps, keyloggers, malware, and phishing attacks. The private keys are generated using two separate entropy components and never exist digitally unless you combine them, ensuring that your crypto stays inaccessible to online threats.

Each Ballet wallet is a secure, air-gapped metal card with a tamper-evident design, giving users full control over their keys from the moment they unbox it. It supports over a thousand cryptocurrencies and NFTs, and with a public address displayed on the card, users can begin receiving funds immediately.

Paired with the optional Ballet Crypto app for viewing balances and sending funds (while keeping keys offline), it’s a sleek and secure option for long-term holders and cautious investors alike. There are no seed phrases to memorize, no software to update, and no complex setup to navigate—just a straightforward, user-friendly experience. 

Whether you're brand new to crypto or simply want peace of mind, Ballet makes managing digital assets easy.

Conclusion

Choosing between a hot wallet and a cold wallet depends on your investment style. If you’re an active trader, a hot wallet may suit you. But if you’re serious about long-term security, a cold wallet like Ballet Cold Storage is the best choice. 

What Customers Say About Ballet Cold Wallets

It’s not just us talking—here’s what actual users have to say about Ballet Cold Wallets:

“Simple to use.

I'm new to crypto and wanted to be sure of ownership and remove my investment from exchange. This was a simple easy way to do that. Will definitely be picking up more for friends and family.” 

— Lloyd p

“Nice coin wallet Great Gift giving idea.

I like the coin wallet. It will make a great gift to my nephews.I think it’s a great way for anyone to save and invest in a fun way. You can track the balance from the App. I am a big fan of the coin wallet. Great idea! “ 

— Tom B.

“Secure my crypto assets with confidence!

A cold wallet keeps my funds offline, safe from hacks and cyber threats. The ultimate peace of mind for my digital investments!” 

— Renata Sartori

Start your journey today: Shop Ballet’s Cold Storage Wallet. 

Useful Links: 

Ballet Official Online Store

Anti-Counterfeiting Guide

Download Ballet Crypto App

 

Stay Connected

X(Twitter) YouTube Telegram Facebook LinkedIn Reddit Instagram