Digital Assets
May 29, 2024

Do Cryptocurrencies Grow When They Are in a Wallet?

Do Cryptocurrencies Grow When They Are in a Wallet?

When you think of cryptocurrencies, the first thing that comes to mind is most likely BTC – it is, after all, the biggest cryptocurrency by market cap.  Today, many other cryptocurrencies are available, including Ethereum, Litecoin, and Ripple. Cryptocurrencies are digital currencies that use cryptography to secure their transactions and control the creation of new units. While cryptocurrencies have been around for over a decade, it is still considered relatively new technology and can be challenging to navigate when first getting started.

One of the most common challenges new cryptocurrency adopters face is understanding how to purchase and then securely store crypto assets. This article will discuss the critical differences between an exchange and a wallet and whether or not assets grow when they are securely in your crypto wallet.

Differences between an exchange and a wallet

The main difference between an exchange and a wallet is pretty simple. It comes down to knowing how digital currencies are bought and stored. 

Where do you purchase cryptocurrencies?

The conventional way of purchasing cryptocurrencies is through an online exchange. Exchanges are websites where you can buy, sell, or trade digital currencies for other digital assets or traditional fiat currencies like US dollars. When buying crypto on an exchange, you need to create an account and link it to a payment method like a bank account, credit card, or debit card. Once your account is funded, you can start buying and selling crypto.

Keep in mind that you do not own the underlying asset when you store your crypto on an exchange. You could lose your funds if the exchange were hacked or went out of business. For this reason, holding your crypto assets elsewhere is generally recommended.

Where do you store your crypto assets after purchasing them?

Cryptocurrencies should be stored in your digital wallet. A wallet is a software program that holds your public and private keys and interacts with the blockchain to allow you to send and receive digital currency. You must use your private key to sign a transaction when you want to spend or transfer your crypto. This transaction is broadcasted to the network and verified by miners, who then add it to the blockchain.

Many types of wallets are available, such as hot wallets (online) and cold wallets (offline). Hot wallets are generally considered less secure since they are connected to the internet and therefore more susceptible to hacks, while cold wallets are offline storage devices like USB drives or hardware wallets that store your private keys offline and away from potential threats.

Although various crypto wallets are available, storing your crypto assets in a cold wallet is generally recommended for maximum security.

Understanding the different wallet types

You must understand the difference between other blockchains before you try and send cryptocurrencies from one wallet to another. If you do try and send an asset from one chain to another, it could be lost forever. 

This process can get a little confusing, but for now, it is just necessary for you to understand the different blockchains and crypto wallets that are associated with each one.

Accessing your crypto wallet

When you set up your crypto wallet, you are given a seed phrase that consists of 12-24 words. This seed phrase serves as a backup for your wallet. It can be used to restore it if you lose access to your device or forget your password. It is crucial to store this seed phrase in a safe place since anyone with access to it will have control over your funds. You must keep your seed phrase in a secure location because if you lose it, your crypto wallet will be lost forever, and you will not be able to access your funds.

Once you have set up your wallet, you can start sending and receiving cryptocurrency. You will need to input their public address when you want to send crypto to someone. A public address is a string of alphanumeric characters representing a blockchain destination. You can think of it as an email address - anyone with a public address can receive funds from you.

How digital currencies grow in a wallet

Understanding how crypto grows is somewhat complicated. Cryptocurrencies can appreciate or depreciate in value regardless of whether they are stored in a wallet or on an exchange. Though, suppose you want to maximize your chances of seeing growth. In that case, it is generally recommended that you store your crypto assets in a cold wallet since this will give you greater control over your private keys and therefore increase the security of your funds.

While there is no guarantee that your assets will grow in value, following these steps can help keep your holdings as safe and secure as possible.

Does the value of your crypto change while in your wallet?

The value of your cryptocurrencies will change when stored in your crypto wallet. The reason is that the cryptocurrency market is constantly fluctuating, and the value of your assets will go up or down depending on current market conditions. Think of this like any other asset or stock that you may own. If you purchase a bar of gold and store it in a bank, the value of the gold will still change as the market changes.

Does the amount of cryptocurrency change while in your wallet?

While the value of your assets will change even when stored in your crypto wallet, the number of cryptocurrencies you own will not change. The only time the amount of crypto you hold will change is if you buy or sell more of it.

Do cryptocurrencies grow when they are in a wallet?

So, to answer the question, do cryptocurrencies grow in a wallet? It depends. The value of your assets may go up or down depending on the market conditions, but the amount of crypto you own will stay the same. 

Digital currency tends to fluctuate frequently, so understanding that the value may change while the amount stays constant is essential. If you want to see your assets grow, it is advisable to store them in a cold wallet for maximum security. Doing so can help protect your holdings and increase your chances of seeing growth.

There are no guarantees in the cryptocurrency market, so always do your research before getting started.

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