What is a hot wallet?

A hot wallet is a cryptocurrency wallet that is connected to the internet. With hot wallets, it is possible to quickly send or receive crypto. Think of an exchange. It needs to be quick and easy for a user to withdraw or deposit crypto. Hot wallets are often associated with exchanges, as most exchanges keep a small percentage of all cryptocurrency in hot wallets. This allows users to trade, withdraw and deposit without having to wait too long. However, in the event of a major hack, the entire wallet can be stolen, since it is connected to the internet.

Chances are you are already using hot wallets yourself. Do you have your cryptocurrency stored at a broker or an exchange? If so, this is also considered hot storage, because you can access your wallet via the internet. It does not matter if the broker or exchange stores the coins on a cold wallet afterwards. The opposite of a hot wallet is a cold wallet.

What are the pros and cons of hot wallets?

The advantage of hot storage is, of course, that you can access your cryptocurrency quickly. After all, it is connected to the internet. But that is also the biggest drawback. Everything connected to the internet is theoretically vulnerable to hackers and criminals. On top of that, the wallet is most likely stored on a computer that can also have vulnerabilities. For hackers, it is a sport to find these weaknesses and drain wallets. As a result, exchanges are regularly hit by hacks where hot wallets are (partially) emptied.

In 2025, a new record was broken: more than $2.7 billion in crypto was stolen in various hacks. Some notable examples:

• Bybit hack (February 2025): North Korean hackers from the Lazarus Group stole a staggering $1.4 billion in Ethereum. This was the largest crypto hack ever. The hackers compromised a third-party service to manipulate the transaction interface, causing Bybit employees to unknowingly approve a malicious transaction.
• Phemex hack (January 2025): The hot wallets of this Singapore-based exchange were compromised across 16 different blockchains.
• Coinbase data breach (May 2025): Criminals managed to obtain sensitive customer data through bribed employees, costing the company an estimated $400 million.

Major hacks also occurred in earlier years, such as the Binance hot wallet hack, the DragonEx hack and the BitHumb hack in 2019. Fortunately, regulation has improved significantly. Exchanges with a MiCA licence are now required to meet strict security standards, including holding reserves and protecting user funds.

For example, Bitvavo offers protection of up to €100,000 on your account and holds both a MiCA licence and a DNB registration. We therefore recommend only keeping cryptocurrency you actively trade in hot wallets, meaning brokers and exchanges where your crypto is stored. Always choose a regulated exchange with a MiCA licence, so your funds are better protected.