What is a Crypto Exchange Wallet & How Does it Works?

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To buy, sell, and trade you need a crypto exchange wallet that holds your crypto assets. Read our blog to understand what a crypto wallet is and how it works?

What is a Crypto Exchange Wallet How Does it Works?

A crypto wallet is a necessity for every trader, it is a software that stores digital assets on a crypto exchange. Apart from storing crypto assets, traders need crypto wallets to protect and validate transaction information.

For example, you bought a certain amount of crypto asset, a digital currency. As this asset doesn’t have any physical form the hustle lies in keeping it safe against any platform failures or cyber thefts. A crypto wallet is what keeps crypto assets for you. A digital wallet has private keys that enables you to validate any transactions. These keys are somewhat like secret codes that allow you to spend the crypto coin that you hold. A blockchain is basically a complete record of all your financial transactions.

This is a detailed guide that will help you acquire basic understanding about crypto exchange wallets, their significance, types, and the withdrawal process for these crypto exchange wallets.

Hot Cold Crypto Exchange Wallets Explained

Both cold and hot wallets serve the same purpose of storing crypto assets for users. The only difference between the two is that a hot crypto wallet is connected to the internet. This aspect of hot wallets comes as a vulnerability and quality attribute at the same time. As it may leave your assets vulnerable to hackers but on the same time, they facilitate faster trades.

On contrast, cold wallets are the safest crypto exchange wallets that remains offline however, transferring funds in and out of these wallets require time and effort. As most of the crypto exchange wallets are custodial or hot wallets, therefore it is important for you to select safest crypto exchange that has high end security measures to keep user funds safe.

In the past, there have been malicious scams that have cost million dollars to exchanges therefore, many crypto coin exchanges have learned from these unfortunate events and have developed robust security protocols to keep their customers’ funds safely.

Exchange Wallet Security and Precautions

There are crypto exchanges in the market that provide competitive fee structure however, their security protocols are completely lax. This can cost you a lot in long term therefore, when choosing a crypto exchange for trading make sure to go through the exchange website and evaluate its security protocols against user funds and t6ransactions.

It doesn’t matter that you are using one of the best crypto exchange on the market, you are still required to protect your personal crypto wallet account. For preventing any kind of cyber theft or failure follow the below listed protocols:

  • At first, always use a strong password which is completely unique to the crypto trading platform.
  • Use a password manager
  • Keep your anti-virus malware up to date at all times
  • Using VPN
  • Use two-factor authentication (2FA) 
  • Use a dedicate email address

Where and How to Withdraw Funds from a Crypto Exchange Wallet

Every trader has different preference, some of them like to store their crypto assets whereas there are traders who like to withdraw their crypto asset right after a trade. Now these funds are directly set to non-custodial or cold wallets that give complete over private keys. A non-custodial wallet can be on your phone, computer, a device similar to USB known as a hardware wallet.

In order to transfer your digital funds, you have to provide determined public address destination of your crypto exchange account. Ensure that the crypto asset you are transferring to your crypto exchange account matches up. For example, Bitcoin can only be transferred into a bitcoin wallet address just like that Ether goes to an Ether wallet address, and so on. You can lose funds if you don’t follow this protocol.

Tip: “The best approach here is to send a small test transaction prior to sending the full amount if you’re new to moving crypto”.


Coming to conclusion is not easy here as both hot and cold crypto exchange wallets serve important functions. If you want fast trades and purchases then a mix of hot wallets seems to be a better solution, however, look for a credible and safest crypto exchange. On the other hand, cold wallets safeguard bulk of your crypto assets and it is advised for crypto traders who huge sum of assets available as balance.

These cold wallets are delicate malware-proof testing software that enable multi-signature financial transactions. These wallets possess a tiny storage device along with a QR code scanning camera to authenticate any digital transactions.

However, keep in mind that just like your hardware wallet, your digital wallet either hot or cold, it requires special security. Therefore, look for wallets or exchanges that have strong security protocols to safeguard your funds.