It’s best practice to keep most of your cryptocurrency off exchanges and in self-custody. However, doing this can be intimidating for many—and understandably so. If you’re concerned about taking the plunge to store your cryptocurrency more securely, this step-by-step guide is for you!
Importance of Self-Custody
As we saw in 2022 with the FTX collapse, it’s important to keep most of your funds in your self-custody.
Unfortunately, there is still significant risk in holding all your cryptocurrency on an exchange because
- Your cryptocurrency isn’t truly yours (it is effectively an IOU) until you withdraw.
- Often, your funds are not covered under insurance, like bank deposits are.
Prerequisites
Before diving into the process, getting a hardware wallet for any substantial cryptocurrency holdings is essential.
The most well-known are Ledger and Trezor, with different hardware wallets supporting different cryptocurrencies. But for now, let’s stick with the Ledger.
If you don’t have one and only have a little, then a web wallet will do!
In previous videos, we dive into mastering cold storage and how to use your hardware wallet; see them below!
➡️ How To Set Up Your Ledger Hardware Wallet
Tips Before Sending
Now, before you send, consider a few tips
#1. Check the last 4 characters of the transaction
First, double-check you are sending assets to the correct address.
#2. Ensure you’re sending the cryptocurrency to the correct blockchain and if it’s supported
Different cryptocurrencies operate on different blockchains. It’s essential to ensure you send your cryptocurrency to the correct blockchain.
You CANNOT send ETH to the Bitcoin blockchain because they aren’t compatible! Always double-check the transaction details, including the recipient’s address and the sent amount.
#3. Test transaction
Thirdly, always send a test transaction if you’re using a new wallet or sending significant amounts. If you need to send a large amount of crypto, consider splitting it into multiple transactions to minimize risk.
Bitcoin hot tip
Some may not know, but when you send a Bitcoin transaction to your hardware wallet, it will populate a different address. This is because when sending Bitcoin, it tries to preserve privacy by using a different address each time.
This doesn’t happen when sending ETH on Ethereum or SOL on Solana.
Practical Example!
In this example, we’ll walk you through how to send Bitcoin from an exchange to your custody!
#1. Log into your exchange where your cryptocurrency is
#2. Log into your hardware wallet and find the cryptocurrency you want to receive from the exchange. In this case, it’s bitcoin.
#3. Copy your Bitcoin address from your hardware wallet or screen the QR code.
#4. Paste the deposit address into the exchange to withdraw. Make sure we are selecting the correct network and cryptocurrency to withdraw too.
Tip: Double-check—if you try sending a cryptocurrency to a different blockchain or address, it won’t work, and you could lose your crypto.
#5. Send a small transaction first if it’s a large amount or a new wallet.
#6. Wait for it to arrive. It could take a few minutes depending on which cryptocurrency you deposit—Bitcoin takes ~10 minutes to arrive.
#7. Once it arrived, send your desired amount.
And that’s it; you’ve now taken your cryptocurrency off an exchange!
Further Resources
For more, see this official Ledger article on the importance of taking your crypto off exchanges into self-custody.