Bitcoin can vanish forever if you lose your private key (a string of text used to confirm transactions) or your password. One study from 2020 suggests that to date about 28% of the entire Bitcoin supply has been lost.
This is not just a problem for inexperienced users, but experts as well. Stefan Thomas, CEO of the crypto firm Coil, recently revealed that he lost 7002 BTC (~$250 million) by losing the password to one of his wallets.
Depending on how you store your Bitcoin, you can easily recover it…or not.
Can You Recover Bitcoin stored in an Exchange?
If you store your Bitcoin on an exchange like Jubiter, Coinbase, or Binance, it is usually easy to recover your Bitcoin.
Most exchanges provide straightforward recovery options. You can reset your account password through an email-based form. You may have to complete additional verification steps, depending on the rules of the exchange and the settings that you have chosen on your account.
In this case, recovering your Bitcoin should be no more difficult than resetting your bank password or email password.
Can You Recover Bitcoin Outside of an Exchange?
If you store your Bitcoin in a wallet that is not part of an exchange, then you are solely responsible for keeping your Bitcoin key safe.
Though experts prefer this method of storage because it gives you sole control over your cryptocurrency, it also comes with much greater responsibility due to how easy it is to lose your key.
In this case, if you lose or forget your key, you have no practical way to recover that key (unless you keep your backup).
Some companies specialize in “brute force” recovery. Those firms can guess your key based on partially lost information and deleted files, but this approach is not guaranteed. If recovery is possible, it is often very costly.
Which Storage Method Is Safer?
Ultimately, Bitcoin storage involves a tradeoff between simple exchange security and more advanced self-managed security.
Bitcoin investors should decide which type of storage and BTC wallet to use based on their experience level. Exchange wallets are more practical for new users, while experts should feel comfortable with off-exchange wallets.
Either way, keeping a backup of all relevant wallet information in a location that is safe from theft and damage is vital.
Disclaimer: information contained herein is provided without considering your personal circumstances, therefore should not be construed as financial advice, investment recommendation or an offer of, or solicitation for, any transactions in cryptocurrencies.