Hardware wallet industry to surpass crypto exchanges: Report

by · July 21, 2022

The crypto hardware wallet industry may be growing at a faster pace than cryptocurrency exchanges, data from several studies suggests.

The current bear market has accelerated the development of the cold wallet industry, while many centralized crypto exchanges struggled to maintain operations. According to a report by business intelligence firm Vantage Market Research, revenue from global crypto trading platforms reached $330 million in 2021.

The report was released on July 21 and suggests that revenues from the global crypto exchange market will reach a value of $675 million by 2028 at a compound annual growth rate (CAGR) of 12.7%. That’s at least half of the CAGR related to the growth of the hardware wallet industry, other reports suggest.

The global hardware wallet market reportedly reached a value of USD 252 million in 2021 and is expected to reach a value of USD 1.1 billion by 2027, or at a CAGR of 27.2%.

The concept of hardware or cold wallets has become increasingly popular in recent years among large centralized crypto exchanges that limit access to funds to individual users over various types of issues. Hardware wallets became even more popular amid the ongoing crypto winter, which pushed some crypto platforms and exchanges to halt withdrawals.

There is another important use case for cold wallets versus crypto exchanges and lending platforms, where the user does not actually control the private keys and thus does not control the funds. Unlike centralized crypto exchanges, hardware crypto wallets are not vulnerable to external manipulation as cold wallet assets cannot be frozen. However, such wallets are still exposed to other risks such as theft, destruction or loss.

According to some industry experts, relying on either only hardware wallets or solely on exchanges is not the best solution for cryptocurrency holders.

“It seems hardware wallet vendors are taking advantage of this debacle, and I hope more people end up learning the many ways to take care of themselves. I think there’s a fair lesson to be learned from all of this,” says Quantum Economics CEO Mati to Cointelegraph.

Related: What happens if you lose or destroy your hardware crypto wallet?

Greenspan noted that there is certainly a risk in storing all your money in an exchange, but recent history has many stories of people who tried to take care of themselves and lost their money as well. He added:

“Self-care is important, but not nearly as important as diversification. The only way to actually reduce risk is to diversify.”

Itai Avneri, CEO and Deputy CEO of digital asset platform INX, believes that the hardware crypto wallet industry will continue to grow, “especially when more centralized and trusted exchanges fail to secure customer funds due to hacks or misuse.” He noted that innovative firms are working on self-custodial solutions that remove the risk of a customer losing or forgetting their private keys.

“It will make the process of holding your keys friendlier and lower a major barrier to allow the retail mass market to join the crypto-economy. Ideally, it should be as easy as creating an email,” Avneri added.