Move Your Crypto Off the Exchanges Now
Move Your Crypto Off the Exchanges Now
With the crypto market crashing, crypto exchanges may go belly up. Here's how to protect your cryptocurrency by moving it to your own wallet.
If you invest in cryptocurrency and store your computer coins on an exchange like Coinbase, now is the time to take those coins off the exchange and into your own possession. It’s no secret that the crypto market is in a tailspin and Coinbase — which lost $430 million and 19% of its users last quarter — is warning that if the company goes into bankruptcy, your coins could go with it:
Moreover, because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors. This may result in customers finding our custodial services more risky and less attractive and any failure to increase our customer base, discontinuation or reduction in use of our platform and products by existing customers as a result could adversely impact our business, operating results, and financial condition.
Now Coinbase is trying to walk that back, assuring customers that the coins on the exchange belong to them and that Coinbase isn’t at risk of bankruptcy. But then yesterday, people suddenly discovered that they couldn’t access their crypto on Coinbase:
There is an oft-repeated maxim in the crypto community:
Not your keys, not your coins.
That is to say: unless you possess the cryptographic keys that grant you access to your coins on the blockchain, you do not actually own the coins. One of the big selling points of crypto is that you can act as your own bank, maintaining possession of your funds without storing them elsewhere. But in the crypto-investing bull run of the past few years, many new entrants to crypto have treated services like Coinbase like a stock exchange.
However, this can be extremely risky, as evidenced by the sudden collapse of Mt. Gox in 2014, which took many people’s fortunes with it. If you want to secure your cryptocurrency, you must bring it into self custody.
You Need a Wallet
The way you take possession of your cryptocurrency is through a piece of hardware or software called a wallet. Wallet is a bit of a misnomer, as it doesn’t itself store any value. Instead, it stores a cryptographic key that grants you access to your crypto on whatever blockchain it’s stored on.
Some crypto wallets only support a single cryptocurrency, usually Bitcoin. Others support multiple coins like Ethereum and its many offshoots. It’s important to choose a wallet that supports whatever cryptocurrency you hold.
There are a few different choices when choosing a crypto wallet:
A dedicated hardware wallet, which is a single-purpose device you connect to a computer to view and interact with your cryptocurrencies. Two popular options are Trezor and Ledger Nano.
A mobile app on your smartphone that acts as a wallet, like Exodus. If you use Android and only invest in Bitcoin, Samourai Wallet is an excellent option, whose developers have a strong track record of protecting user privacy. Mobile wallet apps are convenient for making payments but can be risky if your crypto is stored on a phone you take everywhere. If your phone is stolen, the thief may be able to steal your crypto as well. If you can set up a burner phone to use as a wallet, like an old one you can keep in a safe, it makes you a bit more secure.
An application on a computer that acts as a wallet. Exodus has a desktop app, and Sparrow Wallet is an excellent Bitcoin option. Again, you’re better off using a spare laptop that you keep locked up at home.
I use two wallets. I keep a small amount on Exodus on my iPhone, but I keep the bulk of my crypto on a Trezor Model One and keep it locked up at home. The Exodus app acts as a checking account (a hot wallet) while the Trezor serves as a savings account (cold wallet).
For cold storage, I think hardware wallets are the best choice for most people. However, whenever I try to sell friends on the idea, they balk at paying money for a device to store their crypto. To me, it seems silly to spend thousands of dollars on computer coins and then scoff at spending less than $100 to protect them, but that’s human psychology for you.
So I’m going to focus on Exodus because it’s user-friendly, free, available on most platforms, and it supports a wide variety of cryptocurrencies. If you have a smartphone or a computer, there’s nothing stopping you but you. If you want to use another wallet, the process is pretty similar.
You may be wondering what would happen if Exodus suddenly vanished from the App Store or Google Play Store. As long as the app remains on your device, your keys, and thus your coins, are safely stored in the Exodus wallet. If Exodus disappeared overnight, you could simply transfer your crypto from Exodus to another wallet.
The Importance of a Seed Phrase
When you install Exodus, you are given a 12-word seed phrase and encouraged to make an offline copy of it. This seed phrase is incredibly important because it acts as the “password” to your crypto wallet. Whoever has that seed phrase can install Exodus on another device, punch it in, and create a duplicate of the wallet with access to all the funds.
This is a standard function in every crypto wallet, and it’s what makes crypto incredibly useful for moving money across a border. Memorize your seed phrase, walk across the border, and then you can grab a new wallet and restore it from memory.
It also means that if you lose your phone, you can use the seed phrase to restore your wallet on another phone.
However, it also means that anyone who steals that seed phrase can steal your crypto. And it also means that if you lose that seed phrase, you can’t restore your wallet elsewhere.
So it is critically important to store multiple copies of your seed phrase in secure locations.
The simplest method is to write down two copies of the seed phrase on paper, stuff them in envelopes, and then put each envelope in separate locations. One in your house, ideally in a safe or at least in a hidden area, and another one somewhere outside your house.
An even better way is to etch the seed phrase in metal, which can’t be burnt or ruined by water. Something like a Cobo Tablet lets you arrange Scrabble-like tiles in a steel cassette to make a durable copy of your seed phrase, with no scratching, hammering, or etching required.
You can view your seed phrase in Exodus at any time:
Tap the right-most icon in the dock.
Tap Security.
Tap Backup.
Tap View Secret Phrase.
Place your finger over Touch and Hold to Reveal. Exodus hides your seed phrase if you lift your finger.
The Cost of Moving Your Crypto to a Wallet
Before I show you how to move money from Coinbase to Exodus, you need to understand that while keeping your crypto on an exchange is risky, there is also a cost involved in moving your crypto to your wallet.
Every cryptocurrency works by charging some sort of transaction fee when you move money around. For Bitcoin, this fee is usually pretty small. However, Ethereum and the coins based on Ethereum, like Chainlink and Shiba Inu, also charge something called a “gas” fee.
Gas fees are notoriously astronomical, often costing more than the transaction itself. For this reason, I’ve soured on Ethereum and any cryptocurrency on the Ethereum blockchain because doing anything with it costs a fortune. It may make more sense to sell off your Ethereum on Coinbase than move it to a wallet.
Before you move your crypto out of Coinbase, you’ll be told what the fees will be. Be sure to read closely before approving the transaction.
How to Move Your Crypto from Coinbase to Exodus Wallet
To make this as foolproof as possible, I’m going to show you how to move your cryptocurrency from the Coinbase mobile app to the Exodus mobile app. I’m going to use the Shiba Inu coin as an example since I don’t keep anything valuable on Coinbase.
First, open the Coinbase app and tap on Assets at the bottom. Then under Your Assets, make a note of which cryptocurrencies Coinbase is holding for you.
Next, we want to enable those cryptocurrencies in Exodus. The main screen (access it by tapping the left-most icon on the dock), should have some cryptocurrencies enabled already, but you may need to allow more. Scroll down, tap Add More and then flip the switch for any currency you need to enable. Exodus supports a lot of coins, so you can directly search for the ones you want to enable.
Return to the main screen and tap on the currency you want to import. You’ll see two arrows: an arrow on the left that points up and to the right and an arrow on the right that points down and to the left. The arrow pointing up is for sending money out. The arrow pointing down is for bringing money in.
Tap the arrow pointing down (the one on the right) and tap through whatever prompts there may be. Then you’ll be presented with your wallet’s address for that coin and a QR code. Tap the address to copy it.
Switch back to Coinbase and tap Pay on the bottom of the screen. On the Pay screen, tap Send.
In the center of the Pay screen is the cryptocurrency selected to send. In the screenshot below, Shiba is selected, but you can tap that to change the currency.
At the top of the Pay screen, you can enter an amount. It may be tempting to tap Max, but don’t do it! Your first transaction to a wallet should always be a small amount to make sure that you’re doing everything correctly. If you screw something up, the money could be lost.
Enter a small amount like $1 and tap Continue. Many networks have minimums so you may have to go back and increase the amount. When prompted to view contacts, tap Not Now.
On the next screen, you’re prompted to enter an address. If Coinbase detects an address in your clipboard, it will prompt you to paste it. Your phone may have cleared your clipboard since you copied it from Exodus, so go back and copy it again if you have to.
Tap Preview Send. You’re given one last chance to review the wallet address you’re sending to and any network fees. Because Shiba Inu is built on Ethereum, that means paying damn gas fees, which means it cost an additional $7.72 to send $1. I did it anyway because I love you. Tap Send Now when you’re ready.
After tapping Send Now, keep an eye on that cryptocurrency in Exodus. It may take a few minutes to show up as it works its way through the blockchain. One upside of Ethereum is that transactions move quickly, only taking a minute or two and often instant. Bitcoin transactions can take a lot longer: 30 minutes to an hour, so be patient.
With your cryptocurrency in your own wallet, it’s completely under your control, with you acting as the banker. Take your coins off the exchange and take one more step toward self-sovereignty.