Cryptocurrency
Understanding crypto custody: What different solutions entail for investors and businesses
As crypto continues to cement itself into our financial system, the question of custody, or how individuals and entities should hold their assets, is becoming increasingly important. This is especially true following the fallout of multiple centralized platforms last year, such as FTX and Gemini, which caused many investors to lose their crypto holdings.
The ethos of crypto is decentralization and ownership. Because third parties are effectively cut out, individuals have direct control over their funds. They don’t need to trust middlemen, such as banks or other centralized financial entities, to properly manage their assets.
However, this complete control is often somewhat sacrificed when the question of storage comes into play. There are two types of digital wallets for storing cryptocurrency, custodial and non-custodial wallets, and each have their unique advantages and disadvantages. The primary difference between the two lies in the control and custody of the private keys, which are the cryptographic codes that enable cryptocurrency transactions. Generally, custodial wallets are less safe but more convenient, while non-custodial wallets are more secure but less convenient.
Selecting between the two is a tricky tradeoff, but it is important that users, investors and institutions have a fundamental understanding of how each option works and the associated risks before deciding how they want to store their assets.
When investors choose to use non-custodial wallets, also referred to as self-custody, they have total control over their private keys and by extension, total control over their assets. Self-custodying is in essence the ethos of crypto — there is no counterparty risk. Full ownership gives investors the flexibility to exchange their assets wherever and however they choose.
By self-custodying, there is no risk of a third-party provider getting hacked, going bankrupt or disappearing, which provides a level of security by removing external dependencies. Furthermore, since there is no third-party involvement, transactions can be more private (depending on the blockchain used).
With custodial wallets, users put their assets in complete control of a middleman or service provider who has complete control over the private keys. This poses many security risks and increases the likelihood of loss of funds. It can also result in access limitations, as exchanges may freeze access to funds due to legal issues, policy violations or technical problems.
Even the most high-profile cryptocurrency exchanges have not been shielded from these issues. Many have been targeted and successfully hacked in the past. And if recent collapses like that of FTX have shown us anything, it’s that some firms have also been both reckless in managing customer funds or susceptible to full-blown bankruptcies. Users who custodied their assets on FTX lost tens to hundreds of millions of dollars.
So then, why do investors still choose custodial over non-custodial wallets? Custodial wallets are typically easier to use, especially for newcomers, as they often come with a user-friendly interface. Those offered by exchanges often provide more services, such as trading, borrowing, staking or rewards services. Additionally, many custodial providers have recovery options so if you forget your password or lose access to your account, there is usually a way to recover it because the service provider maintains control of the keys.
Whereas with self-custody, individuals are responsible for maintaining their private key. There is no password reset. Misplaced private keys may mean total irrecoverable loss of funds. Lastly, certain custodial providers offer insurance solutions to mitigate certain counterparty risk.
As users assess the pros and cons between both solutions, there are additional factors that have become increasingly relevant given recent market investors. When users deposit their crypto on a centralized exchange, they are essentially “loaning” their crypto coins to the exchange, in turn making them unsecured creditors. In doing so, they give the exchange the power to use those funds at its discretion, meaning the funds may be used as collateral for large loans, trades, etc.
Assuming these exchanges use the funds as intended, implement risk management strategies and keep careful records to inform next steps, they offer a convenient and theoretically safe avenue for investors to hold their crypto. Unfortunately, FTX has proven that firms don’t necessarily abide by responsible standards, calling into question the integrity of centralized exchanges and the safety of custodial wallets more broadly.
Businesses can, in part, avoid some of these third-party risks by ensuring they select exchanges that are regulatory compliant, employ high-security standards and are transparent with regard to their funds and ability to collateralize assets. As greater regulation is introduced, there should be tighter safeguards in place to protect investors and their funds when they choose to trust custodians with their crypto.
Overall, businesses and individuals should constantly scrutinize their custodial strategies to ensure their funds are properly managed. One avenue could be to employ both types of custodial solutions for funds, keeping a very close eye on those that are held by custodians and ensuring they are properly diversified.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Anthony Georgiades is the co-founder of Pastel Network.
This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.
TL:DR;
- Although it’s yet to see the light of day officially, Pi Network continues to attract new users, and its community is growing in many large countries.
- Nevertheless, a large portion of its user base still wonders when the mainnet will be live, with the latest projections indicating that this will happen by the end of March 2025.
Community Grows
The controversial crypto project has attracted a substantial fan base, with previous estimates suggesting that more than nine million people have completed the KYC verifications and migration process to the mainnet. Perhaps due to its popularity, the number of scams impersonating the protocol is also on the rise, which prompts the team to issue frequent warnings about such frauds.
The official X page focused on Pi Network news, Pi News, outlined a few consecutive developments in different countries that have boosted the project’s popularity even further in those regions. Most recently, the team posted about a Megha Event held on January 26 in India, where a group of supporters gathered to discuss the protocol.
Megha Event held on January 26, 2025: in India Pi Network Community gathering in Odisha celebrating #PiNetwork pic.twitter.com/d05HgO0t2H
— Pi News (@PiNewsMedia) January 30, 2025
Before that, the team bragged about an event that took place in Nigeria, saying that its presence in the country is “growing stronger every day.” Pi Network’s popularity is also on the rise in another African country – Botswana.
But When Mainnet?
The main criticism against the project has been the lack of an official mainnet launch and token release. Although Pi Network was created years ago, it continues to delay their launch, which has caused some speculation about a potential fraud.
However, the team still maintains that the protocol will see the light of day officially soon. In fact, its most recent publication on the matter indicated that the Open Network will be live this quarter (which ends in March).
Although the news was praised by many, it also faced some skepticism due to the previous delays. Many comments advised people to lower their expectations due to Pi Network’s history.
— Pi News (@PiNewsMedia) January 27, 2025
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The launch of Truth.Fi has shaken up the crypto market – and Solana (SOL) is capitalizing.
Trump’s newest company is planning a massive $250 million crypto investment.
Some traders are now searching for low-cap coins that could benefit from this potential investment.
Solaxy (SOLX) is one of these coins, having raised more than $16 million in its limited-time presale phase.
Solana Rallies After Trump’s Truth.Fi Prompts Crypto Market Speculation
Solana is trading around $241, marking a 6% jump in the past 24 hours.
It’s now the biggest gainer among the top 10 cryptos by market cap and has almost caught XRP in terms of daily trading volume.
SOL is now at its highest price since last Sunday.
This rebound seems linked to Trump Media & Technology Group’s Truth.Fi, a new financial entity that’s got everyone hyped.
Truth.Fi is looking to invest up to $250 million into digital assets, with Bitcoin firmly in its crosshairs.
That’s a considerable portion of the firm’s $700 million war chest.
And everyone’s speculating on which coins Truth.Fi might invest in alongside Bitcoin, with Solana looking like a prime candidate.
This isn’t Trump’s first exposure to the crypto market.
He’s been investing in it through World Liberty Financial and has also promised to create a strategic Bitcoin reserve for the U.S.
Market Sentiment Flips Bullish Despite Latest Fed Decision
The broader market is recovering, with Bitcoin and Ethereum back in the green – posting 3% and 5% gains, respectively.
But the biggest gainer has been Sui with a 14% rally that’s got everyone talking.
Trading volumes are soaring too, jumping 17% from yesterday’s figure.
Investor sentiment seems to be shifting from cautious to confident, as evidenced by the Crypto Fear & Greed Index returning to 70 – firmly in “Greed” territory.
All of this is despite the Fed keeping interest rates steady at yesterday’s meeting.
Usually, that kind of news would lead to a sell-off, but the market seems calm about it – suggesting expectations were already priced in.
Crypto analyst Rananjay Singh is calling it: “The bull run is taking shape again.”
And he might be onto something, given the climbing trading volumes and positive price action across the board.
Solana looks primed to capitalize, with the next key resistance level around $258.
If SOL can breach that level, there’s a potential path back to all-time highs.
Is This New Layer-2 Project About to Pump? Solaxy Passes $16M in Presale & Receives Influencer Endorsement
All of the buzz around Solana (and crypto in general) is putting the spotlight on Solaxy, a new Layer-2 project in presale.
With over $16 million raised already, Solaxy is positioning itself as the solution to Solana’s scalability issues.
It’s precisely the kind of infrastructure that could catch the eye of big players like Truth.Fi.
What’s interesting about Solaxy is its cross-chain approach.
Solana has always been one of the fastest chains, but Solaxy’s ability to bridge with Ethereum opens up a world of possibilities for traders and developers.
Solaxy promises to easily handle high-volume trading – an interesting pitch as more institutions look to get into crypto.
And there’s more since Solaxy also has a staking protocol built in.
Currently, annual yields are estimated at 243%, encouraging investors to lock up more than 4.7 billion SOLX.
The developers have a clear roadmap for after the presale, beginning with a DEX listing (and a potential CEX listing).
Some popular influencers are already optimistic about these listings.
ClayBro, known for his in-depth crypto analysis, believes that once Solaxy goes live, it could “take over” the meme coin space.
He believes its mix of utility and meme energy could set it apart from all of the useless meme coins launched every week.
Overall, things look promising for this new Layer-2 project – making it one to watch in early 2025.
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After a short-lived rally past $3,700 in early January, Ethereum struggled to sustain its gains and is now 12% below its recently established local top. The leading altcoin’s market sentiment remains muted.
As such, a new analysis suggests that the next significant price shift will largely be influenced by whales.
No Whale Frenzy
Ethereum’s price has stabilized above $3,000, but CryptoQuant analyst ‘IT Tech’ warned that a drop to $2,800-$2,500 remains a possibility if whale activity surges amid price weakness.
Currently, Ethereum’s large transaction volume (LTV) remains low compared to previous bull cycles, indicating a market driven more by retail investors than large institutional players.
Unlike in 2017 and 2021, there is no sign of excessive speculative activity from whales. Such a trend usually indicates a more organic rally driven by retail players instead of speculative mania.
While occasional spikes in LTV have been observed, they are not yet at levels that typically precede major price movements. For Ethereum to continue its upward momentum toward $3,500 and beyond, analysts suggest a sustained increase in LTV is necessary as confirmation of strong institutional interest.
However, if large holders begin distributing ETH while prices weaken, it could trigger a significant correction. Investors should closely monitor LTV trends, as sudden shifts in whale behavior could be an early warning of a price decline to the $2,800-$2,500 range.
Rocky January for Ethereum
The Ethereum ecosystem as a whole has faced significant criticism over co-founder Vitalik Buterin’s ETH sales, centralization fears, and regulatory uncertainty. However, market experts argue that negative sentiment often precedes a rally, with a few projecting the asset to surge from $4,000 to $20,000.
Meanwhile, Vivek Raman, former UBS trader and founder of Etherealize, believes that crypto assets remain undervalued. He cited five key reasons for bullishness.
First, the Trump family’s DeFi project, World Liberty Finance, is heavily invested in Ethereum. Second, he pointed to the rising institutional demand with asset managers and hedge funds embracing tokenization, a movement reliant on Ethereum’s infrastructure.
Third, investment banks are integrating crypto functionality, favoring Ethereum for its security and programmability. Fourth, the repeal of SAB 121 removes regulatory barriers and, in turn, enables banks to hold ETH and other tokenized assets.
Finally, a staked Ether ETF is expected, backed by a more innovation-friendly SEC leadership.
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