intCryptocurrency Trading Fundamentals
Course overview
1. What are cryptocurrencies?2. What is cryptocurrency trading?3. Self-custody versus custodial wallets4. Crypto market cycles5. Analysing altcoin fundamentals6. Advantages of cryptocurrency trading with Axi7. Conclusion3. Self-custody versus custodial wallets
Custody is a major topic of debate in the cryptocurrency world, with some crypto enthusiasts advocating for investors to have control over their assets. This involves the safekeeping of one’s private keys or seed phrases in a dedicated wallet. These wallets can be software, such as MetaMask, hardware, like Ledger, or a paper wallet, which are private keys that are printed or even memorised.
Crypto wallets can feel a bit tricky at first, especially for beginners. There are options that give you more control over your crypto but keeping it safe takes a little learning. Custodial wallets, on the other hand, are easier to use since a trusted third-party (such as a crypto exchange or financial institution) handles security, but they introduce counterparty risk.
Top 5 advantages and disadvantages of self-custody
| Advantages | Disadvantages |
|---|---|
| Direct ownership provides complete control over assets. | Individual responsibility for the security of private keys or seed phrases. |
| No third-party access to funds or transaction history (privacy) | Some technical knowledge is required to set up and use. |
| Eliminates the risk of third-party custodians being hacked. | Risk of losing your wallet. |
| There are often no fees associated with self-custody wallets. | Potential for permanent loss due to human error. |
| Aligns with the principle of decentralisation. (Not your keys, not your coins) | No diversification |
Quiz
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What is an advantage of using CFDs over directly buying cryptocurrency?
CFD trading happens between you and your broker, removing the need to manage a separate crypto wallet for your holdings.