Confidence in hardware wallets has been hit after incidents involving tampered Ledger devices and Coldcards that generated seeds that were not truly random. Cointelegraph wrote that more than $200 million worth of crypto was stolen in recent months in those cases, showing that even careful users who bought from official sources, stored seed phrases correctly and followed the idea of "not your keys, not your coins" can still face risks outside their control.
The report also pointed to a rise in physical attacks on crypto holders. In France, it said, there has been a so-called "$5 wrench attack" every 2.5 days this year. It added that many owners have also lost wallets and seed phrases over the years, making the downsides of hardware-wallet storage easier to see.
At the same time, Cointelegraph stressed that every alternative comes with its own weaknesses. Spreading holdings across different addresses and different custody methods, it said, can at least limit the damage if one method is compromised.
1. Crypto ETFs
The first alternative in the report is a crypto exchange-traded fund, though it noted that an ETF is not really a direct way to store crypto. Even if an investor deposits Bitcoin, that exposure is converted into shares of a financial product that holds crypto through a custodian. What the investor owns is a dollar-denominated claim on the ETF’s net asset value, not Bitcoin onchain.
The benefit is convenience. Investors do not need to protect a seed phrase, back up a wallet or worry about every knock at the door. The trade-offs are different: reliance on a centralized provider, third-party custody arrangements, fees and the possibility that the share price may diverge from the market price of the underlying digital asset.
Ophelia Snyder, co-founder of asset manager 21Shares, told Cointelegraph Magazine that exchange-traded products make more sense "for most people most of the time" because of "tax, estate planning and security reasons." She also said the main trade-offs include the loss of "ability to use crypto onchain" and "some risk exposure to the issuer." In her view, security depends on the provider, and the controls around wallet infrastructure should be a major factor when choosing a product.
PlanB, the pseudonymous creator of the Bitcoin stock-to-flow model, moved his BTC to ETFs in 2025 and said he was heavily criticized for doing so. After the Ledger and Coldcard incidents, he said: "Zero regrets of my ETF decision. Peace of mind."
2. Passkey-based wallets
The second option is the passkey-based wallet. Passkeys let users access accounts with a cryptographic credential stored on a device, usually a phone through Apple or Google passkeys, and are often protected by a fingerprint, face scan or PIN. Unlike hardware wallets, they do not require a dedicated device to keep keys offline. Cointelegraph said they are more common on chains that support smart contracts.
The article named Coinbase Wallet’s Smart Wallet, Clave and Infinex as examples, noting that they differ in design and recovery options.
Passkeys may offer a smoother user experience, but the report said they are not a cure-all. Losing a device or a passkey can still create access problems, so users need to understand how backups work and whether recovery depends on trusting a third party.
In June 2024, Blockstream chief executive Adam Back questioned Coinbase’s Smart Wallet and asked what would happen if a passkey were hacked. He said it "sounds like basically a hosted wallet with a better sales pitch."
3. Multisignature wallets
A multisignature wallet requires more than one key to approve a transaction. In a common 2-of-3 setup, three separate signers each hold a key, and any two must approve before funds can move.
This can reduce dependence on a single key or device, but it does not always remove hardware wallets from the setup. Cointelegraph gave Casa as an example. The company offers multisignature custody for individuals and families using a combination of a hardware wallet, a mobile phone and a key held by Casa.
The article also noted that many of the largest projects in the Ethereum ecosystem manage their treasuries through Safe Wallet, formerly Gnosis Safe, an onchain smart-account multisig with a web-based interface.
Still, multisig has drawbacks. Setups involving multiple people require signers to remain available. Smart-contract wallets can introduce vulnerabilities in code or configuration. And if an attacker compromises enough signers, that attacker can still authorize a transaction.
Approval coordination can also slow transfers, which matters when time is critical, especially if signers are spread across different locations and time zones.
Earlier this month, Casa chief executive Nick Neuman told Cointelegraph that even with a multisig arrangement, users should spread risk across multiple providers instead of relying on only one.
4. Centralized exchanges
Keeping crypto on a centralized exchange shifts private-key management to a company and removes much of the burden of self-custody. For active traders, or for holders who do not want to manage backups and recovery phrases, that can be the simplest route.
But the old warning remains relevant here: "not your keys, not your coins." Cointelegraph said crypto’s short history includes many exchange hacks and exploits, from owners who took access to user assets with them to their graves to one of the largest BTC hacks on record, with investors still waiting 13 years later to recover their coins.
Operational security at centralized exchanges has improved over time, the report said, and many platforms now publish proof-of-reserves reports or maintain emergency funds to help cover losses.
Even so, proof of reserves does not establish a company’s full financial health or prove that it can meet every obligation.
The article also said that rising reporting requirements, including the Organisation for Economic Co-operation and Development’s Crypto-Asset Reporting Framework, are pushing exchanges to collect identity, residency and tax information from customers. Failure to comply can lead to account restrictions or suspended withdrawals.
5. Paper wallets
A paper wallet traditionally consists of a cryptocurrency address and its corresponding private key printed on paper.
It keeps key material offline without requiring a dedicated hardware device, but generating one safely can be difficult. A compromised computer, a malicious generator or a poor source of randomness can expose the key before it is ever printed.
Paper can also be lost or damaged easily. The article added that stamping a seed phrase onto metal is a better alternative. Another issue appears when funds are spent: importing the private key into an internet-connected wallet can weaken security.
For that reason, Cointelegraph said paper wallets are an alternative to hardware wallets, but for most users they are not a better one and compare poorly with offline storage methods that are easier to manage.
No single ideal method
The report closed by saying there is no perfect way to store crypto. The right choice depends on each holder’s own circumstances and needs.
Snyder said that if a user does not fall into the group for whom self-custody makes sense, then self-custody may generally not be the best fit. In that case, she said, holding some crypto on a centralized exchange and in an ETF can be "a really useful tool as part of a portfolio approach to holding crypto."