The crypto market has had turbulent two years; arguably, the industry that has been hardest hit by the uncertainty clouding the outlook for the global economy and financial markets in the wake of Covid-19 and amid the fallout from the protracted war in Ukraine.
The resultant risk aversion has seen the market cap of the crypto market contract by two-thirds to about $1 trillion from its heady peak of $3 trillion in 2021. The value of bitcoin, the market’s dominant cryptocurrency, has fallen to less than $20 000 from the near-$70 000 peak it reached in November 2021.
It’s undoubtedly been a rollercoaster for crypto investors. Still, several powerful market forces are expected to underpin the central role cryptos are expected to play in a future financial system that is already being driven by innovation, disruption, demographic trends, and the ongoing decentralization of the traditional financial services industry.
A variety of estimates of how much the crypto market will grow over the medium term – out to 2030 – put the likely compound average annual growth rate (CAGR) at more than 12%. In its 2022 predictions for crypto, Capital.com foresees the market expanding almost four-fold to $14.94 billion in 2030 – a CAGR of 12.8% from $1.4 billion in 2020.
What is a crypto wallet?
Crypto wallets are where owners of cryptocurrencies store and trade their digital assets on the blockchain. Crypto wallets function as a ledger and your personal account on a blockchain network and provide access to transaction history. When you send your coins, you use your private key to sign the transaction and broadcast it to the blockchain network. When you say you have cryptocurrency, you actually mean that you have a key that confirms your ownership of your digital money and allows you to make transactions. There is also a public key that allows you to receive cryptocurrency transactions. There are various wallets, but over time some have become the leaders in the industry because they best meet the needs of crypto holders.
Key considerations when choosing a crypto wallet include the following:
Security should be a prime concern
Hot (online) versus cold (offline) storage
Number of cryptocurrencies and digital tokens accommodated on the wallet
Transaction fees and flexibility
Closed versus open-source software
Means of access – desktop, desktop/mobile, or mobile only
Custodial or non-custodial
Comparing custodial and non-custodial wallet technology
When choosing a crypto wallet, clients can select a custodial wallet, where you entrust a third party to keep your assets secure, or a non-custodial wallet, where the client has complete control of the assets, and there is no third party involved. Often crypto investors opt for a combination of both.
Each option has pros and cons that you must consider before deciding which option best suits your needs.
Below are the advantages and disadvantages of a custodial wallet:
Benefits and advantages
The downsides and potential risks
And now let’s look at non-custodial wallets:
Top crypto wallets for 2023
There are various wallets, but over time some have become the leaders in the industry because they best meet the needs of crypto holders.
Among the top crypto wallets in the industry are Coinbase, Crypto.com, Electrum, Mycelium, and Ledger. We detail their key attributes and features below.
Coinbase is one of the oldest and better-known crypto wallets. It’s considered to be best for beginners because of its intuitive and easy-to-navigate interface. Highly secure, Coinbase supports an extensive 44 000 digital assets. Security is assured with its multi-signature capability, two-factor authorization (2FA), and the fact that it is backed by a reputable trading platform that can recoup lost or stolen assets.
Crypto.com supports 250 currencies, including its own CRO coin, and is ideally suited for active traders. It also functions as a crypto bank, enabling clients to get paid in crypto and transact on pre-paid Visa cards. Coinbase also offers interest-bearing accounts at rates that are at a premium to conventional savings accounts and loans. Interest rates depend on how long you leave your crypto in the account and the amount you stake.
One of the original wallets established in 2011, soon after bitcoin was created, Electrum is highly regarded for its security and customizability. It is also easy to use and can be set up in minutes because it uses a lightweight client and only downloads part of the blockchain to facilitate transactions. Clients can customize their transaction fees, and its open-source software is available for scrutiny. Security is more robust than most hot wallets, with the wallet offering multisig functionality, 2FA, transaction proof checking, and the wallet integrates with cold storage.
Mycelium is also one of the earlier wallets built on open-source software. Mobile-only, it supports bitcoin, Ethereum, and ERC20 tokens. It has a built-in exchange, customizable transaction fees, and offers hardware wallet support.
Ledger offers a second-generation cold wallet hardware wallet, with access provided via desktop and mobile. Notwithstanding a hack attack that compromised customer data and not private keys, the wallet is considered to offer good security because it stores the crypto in a USB and Bluetooth-enabled hard wallet. Ledger supports 1 800 cryptos.
Evolution of crypto-friendly banking
Crypto-friendly banking infrastructure has evolved rapidly alongside the fast-growing appetite for trading and buy-and-hold crypto investors. Some leading neobanks that have incorporated crypto trading and storage in their range of services include Revolut, Robinhood, PayPal, Square, and Vivid.
Revolut is a high-tech digital bank and crypto exchange provider. It offers its clients essential banking services, namely managing, spending, borrowing, investing and protecting their money, all on a single app that is simple to use and frictionless.
Robinhood differs in that it is primarily a commission-free stock and investment trading platform, including cryptocurrencies, and became a household name during the Covid-19 pandemic. It generates revenues from transactions on the platform, such as payments for order flow.
PayPal has dominated the digital payment scene for almost 25 years, facilitating billions of transactions by giving its clients alternative ways to make payments and send and receive money online. The digital payment provider recently announced it was incorporating cryptocurrencies into its offering. It allows users to store the cryptocurrency they buy on PayPal and, in June this year, announced that its users would be able to transfer cryptocurrency from their accounts to other wallets and exchanges.
Block, formerly Square, is financial services and online payment company for small businesses, offering credit card processing, a payment gateway, invoicing, booking, and product inventory management. Through its Cash App, a peer-to-peer payment system, Blocks gives its clients access to bitcoin and other blockchain technologies. It’s a fast-growing service, with bitcoin revenue now contributing 48% to overall revenues in the group.
Vivid is a one-stop-shop next-generation financial app that allows its clients to make payments and transfers, earn interest on their current account, trade in a range of ETFs and stocks and buy, store and cash out of more than 50 cryptocurrencies. According to Fintech Compass, Vivid Prime's premier paid-for offering “is a strong entrant to the ‘bank accounts with cards combined with crypto’ category”.
Digital currencies are gaining momentum in both retail and business banking, extending payments and investment opportunities. Thus, adding crypto support is the most priority task for many FinTechs in 2023 and our white-label crypto solutions are designed to help avoid challenges and bottlenecks. Reach out to us to learn more about our wallets, custody and exchange solutions that can power up your product roadmap.