If you want to know can your bitcoin grow in price while in a wallet, please read further. You will also find information about why it does and what happens when you move coins from exchange to a wallet. As well details about whether you should move your coins to a wallet and how to be safe with a wallet.
Summary / TLDR:
- Your Bitcoins will increase or decrease in value in time when stored in a wallet.
- If the value of your coins goes up, your coins will be worth more, no matter where you store it.
- If you move your coins from exchange to your own wallet, they will be worth the same as before.
Also, their price will change over time exactly the same as if they were on exchange.
- All cryptocurrencies are stored on accounts which are called addresses. Each address has its own access key – the private key.
- When you store coins on an exchange, they hold all the keys while letting you use your coins.
With coins stored in your own wallet, you hold the keys yourself and no one else. A hardware wallet is your best choice.
- Storing coins on your own wallet protects you from exchange bankruptcy or hack.
However you need to keep your wallet recovery phrase secure.
- It is important to properly secure your wallet recovery phrase (seed), preferably with solid stainless steel crypto backup.
- To sell your coins, you usually have to transfer them from a wallet to exchange.
Answer to the question: Does the value of cryptocurrency and Bitcoin increase in a wallet?
Yes, your Bitcoins will increase or decrease in value in time when stored in a wallet. Their price will change along with the market. If Bitcoin price increases you will gain. It does not matter for this if you store your bitcoins in your own wallet or in the exchange.
The same also applies to other cryptocurrencies like Ethereum or altcoins. Yes, your cryptocurrency will increase or decrease in value when stored in a wallet. Price can be higher or lower in time and the value of cryptocurrency will change regardless if it’s stored in a wallet or exchange.
This applies to all types of wallets: paper wallets, hardware wallets and software wallets. It does not matter for the value of your coins where you store them. Their price will fluctuate the same if stored on an exchange as in a wallet. Coins do not have to be on exchange to have value.
If the value of Bitcoin goes up, your coins will be worth more, no matter where you store it.
Why does the value of Bitcoin and cryptocurrency increase/decrease in a wallet?
Think for a second about gold. Imagine you have a few gold coins or ingots in a safe deposit box in your bank. If your gold was worth $1000 when in the bank’s vault, it will have the same value of $1000 when moved to the safe in your house. If the price of gold increases by 20% in a year, your gold value will also increase by 20% no matter if stored in your own safe or in a bank.
For Bitcoin and other cryptocurrencies, it is the same as with gold, in regards to their location and value. Their value does not depend on their location. If you move your coins from exchange to your own wallet, they will be worth the same as before. Also, their price will change over time exactly the same as if they were on exchange.
Where the Bitcoin and cryptocurrency are stored?
With cryptocurrencies like Bitcoin or Ethereum, their true location is a bit different than with cash or gold coins. All cryptocurrencies are stored on accounts which are called addresses. Each address has its own access key – the private key. This access key grants full access to the account and allows making deposits and withdrawals.
However your Bitcoin account (the address) is no physical place. It is a virtual location on the main Bitcoin register, which sort of accounting ledger. This main register is called blockchain and it’s where all addresses are stored as well as a history of all transactions. This is where your account (address) is. What you truly own are access keys to this account.
(please not that it’s a simplified explanation. Cryptocurrencies are stored on the blockchain, and they don’t really move from one address to another. When a transfer happens, blockchain just records where the coins are now.)
You can think of the bank’s deposit boxes again. If you own the key to the box, you can access it and take stuff in or out of the box. If you give the key to your friend, he will be able to access it then. The same is with Bitcoin and other cryptocurrencies. Your access key (private key) opens your crypto account and allows you to bring coins in or out.
When you store your coins on the exchange, the exchange holds all the keys to the accounts and can access them freely. They let you use your accounts and move coins but not the keys. This is a similar situation as with the normal bank account where you keep your dollars. They let you use your money, but you never really see your money and don’t know where is it. If the bank disappeared so would your money. The difference is that normal banks are protected against failure by governments and central banks while crypto exchanges are not. When crypto exchange gets hacked or goes bankrupt, all your funds will be gone.
What happens when I move my bitcoin or other coins from exchange to my own wallet?
By moving your coins from an account on an exchange to the account on your own wallet, you are doing essentially the same as moving gold/money from the deposit box to your own safe in your house. You gain total control and no one else but you can access your coins.
Should I move my cryptocurrencies to a wallet?
We think that everyone should store their Bitcoin or cryptocurrencies in a secure wallet, preferably a hardware wallet. You should remember however that when using a wallet you are responsible for keeping your access keys secure. If you think you are responsible enough to keep your own keys you should move your coins from the exchange. Most experts in the field also recommend to “be your own bank”.
However, if you don’t hold a lot of value in your coins, you may stick to the exchange. When your funds multiply in the future, you can always move your coins to your own wallet.
How to keep my wallet safe? How to secure my recovery phrase?
A wallet requires also to keep sort of password – a recovery phrase (seed) in case the wallet is lost or broken. The recovery phrase allows you to create a 1:1 copy of your wallet (a backup) when needed. You can simply get another wallet and with this phrase, you can make a full working copy. You should learn how to secure your recovery phrase because if you lose it, you will lose access to all accounts stored on the wallet if it’s broken or lost. Most recommended is a crypto steel backup.
It should be also placed in a safe location because it could be used by someone else to access create a copy of your wallet and access the accounts in it. Also, you should never input your recovery phrase into a computer/smartphone or take any photos of it.
Most experts recommend the use of hardware wallets. A hardware wallet is a small electronic device that keeps all your keys secure inside, never showing them to anyone or to the Internet. Hardware wallets will keep your keys and coins secure even if used with a pc or smartphone full of viruses and malware.
Can I sell coins stored in a wallet?
Usually, you will need to transfer your coins from accounts in a wallet to the account on the exchange. You will then be able to change your bitcoins or other coins to dollars or other currency and make a transfer to your bank.
Some wallets allow their users to change the crypto currency they own to another crypto currency without the need of transferring the coins to the exchange. This is possible by integration with decentralized exchanges.