Should you store Bitcoin in a cold wallet?

I intend to buy Bitcoin to accumulate assets. However, recently, I read news about the scandal related to ONUS and some other “grass” exchanges, so I am also concerned about depository on the exchanges.

So should I store with a cold wallet? Ask experts for advice.

Manh Dung (Hanoi)

Consulting expert:

Your question reflects a very common concern of individual investors after recent incidents involving platforms such as ONUS and some small-scale exchanges. Therefore, transferring digital assets to cold wallets significantly reduces some of the specific risks of centralized exchanges, but it does not mean that all risks disappear. It’s more important to understand what you’re holding and what kind of risk you’re taking.

In essence, when you buy Bitcoin (BTC) or any digital asset on a centralized exchange – whether domestic or international – what you own is actually just a balance recorded in their system. The real control, i.e. the private key, lies on the exchange side. This means that if the platform has liquidity problems, has a system attack or is caught up in legal risks, your assets may be frozen or you will lose the ability to withdraw.

Market history has clear precedents such as Mt. Gox in 2014 caused more than 850,000 BTC of users to disappear, or FTX in 2022 with billions of dollars in assets trapped when the exchange went bankrupt. Therefore, in the crypto community there exists a familiar principle: “Not your keys, not your coins” – do not hold the keys, do not really own the assets.

Cold wallets are seen as a solution to help users regain that control. This is a hardware device, popular like Ledger Nano or Trezor, that stores private keys completely separate from the Internet. Unlike hot wallets – including accounts on exchanges or applications that are always connected to the network, cold wallets only work when users actively connect and confirm transactions. The private key does not leave the device, greatly reducing the risk of remote attacks or reliance on third-party systems. Simply put, when you leave assets on the exchange, you are using someone else’s wallet; When using a cold wallet, you are in direct control.

However, it needs to be realistically recognized that cold wallets are not an “absolute shield”. It does not eliminate risk but only transfers risk from the system side to the individual side. If stored insecurely, misdirected when transferring assets, or lose the seed phrase – a string of random keywords generated when a user creates a new blockchain wallet, the user can lose all assets with almost no way to recover. Purchasing equipment from non-genuine sources also carries the risk of previous intervention.

This is a fundamental difference compared to the traditional financial system, where users can still rely on banks or intermediaries when problems occur. Therefore, the reasonable approach is not to choose strictly one of the two, but to allocate according to the intended use.

Long-term holding assets with few transactions should be transferred to cold wallets to reduce systemic risk. Meanwhile, you should still maintain a portion on reputable exchanges to ensure liquidity and convenience when trading. This is a strategy that balances safety and flexibility, instead of “going all in” on a single solution.

From a broader perspective, recent incidents are not just a problem of a few platforms, but also reflect the fact that many people participate in the digital asset market but do not really understand how it operates. Investing without understanding the depository mechanism is like depositing money without knowing how the organization you are depositing operates. As the legal framework in Vietnam continues to improve, proactively understanding the tools you use and how to protect your assets becomes a key factor.

Finally, it should be emphasized that the safety of digital assets does not depend on whether you choose a hot wallet or a cold wallet, but on the degree to which you understand and control your assets. Cold wallets are an important step forward in self-protection, but are only truly effective when accompanied by knowledge and risk management discipline.