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Self custody

Self custody

How to store bitcoin safely

Owning bitcoin means holding the key to it. Hold the key yourself and no exchange, hacker or bank can take it from you. Here's how to do it properly, step by step, without making the mistakes that cost people their bitcoin.

By Anand · Updated 14 October 2026 · 10 min read

The short version

Bitcoin left on an exchange is a promise from that exchange. Exchanges, including New Zealand's own Cryptopia, have failed and left customers waiting years.
A hardware wallet keeps your key on a small offline device. It's the usual choice for savings. Buy it directly from the maker and keep its software updated: two big 2026 incidents show why.
Your 12 or 24 recovery words are your bitcoin. Write them on paper or metal, never digitally, and never share them with anyone.
Leave your family instructions they can follow, but never put the words in your will.

Why hold your own bitcoin?

A bitcoin wallet doesn't actually hold coins. Bitcoin lives on a shared public ledger. What a wallet holds is the key: the secret that lets you move your bitcoin. Whoever controls the key controls the bitcoin.

When you leave bitcoin on an exchange, the exchange holds the key. You see a balance, but what you own is its promise to hand the bitcoin over when you ask. That promise has been broken before:

Cryptopia, Christchurch, 2019

This Christchurch exchange, with about 2.2 million registered users worldwide, was hacked in January 2019, losing about $30 million of customers' crypto, and went into liquidation. Its first payouts to customers came in December 2024, almost six years later.

FTX, 2022

One of the world's largest exchanges stopped processing withdrawals in November 2022 and filed for bankruptcy days later. Reports showed it had lent customers' money to a sister trading firm.

Self custody removes that risk. Nobody can freeze, lend out or lose bitcoin you hold yourself. It also moves the responsibility to you: Chainalysis estimated as early as 2017 that 2.8 to 3.8 million bitcoin had already been lost for good. This guide is about getting the benefit without becoming one of those numbers.

Your options, from easiest to strongest

Leave it on the exchange

Nothing to set up and easy to sell.

The trade-off: you own a promise, not bitcoin. Exposed to hacks, collapses and frozen withdrawals.

A phone wallet app

You hold the key, inside an app on your phone. Free, quick, and good for learning or small everyday amounts.

The trade-off: your key lives on a device that's always online, so malware or a stolen, unlocked phone is a risk.

Usual choice for savings

A hardware wallet

A small dedicated device that keeps your key offline. Every transaction must be approved on the device's own screen, so a hacked computer can't move your bitcoin.

The trade-off: you buy the device, and setting it up carefully takes a little time.

Multisig

Several keys on separate devices, for example any 2 of 3 needed to move funds. Losing one key, or having one stolen, isn't fatal.

The trade-off: more to set up and keep track of. Usually a second step once you're comfortable with one hardware wallet.

Many people use more than one: a phone wallet for small amounts and a hardware wallet for long-term savings, like a wallet in your pocket and a safe at home.

Your recovery words are your bitcoin

When you set up a wallet, it shows you 12 or 24 ordinary English words. Almost all wallets take them from the same standard list of 2,048 words, so those words alone can restore your bitcoin on any compatible wallet. If your device breaks, is lost, or its maker goes out of business, you buy a new one, type in your words, and your bitcoin is back.

The flip side: anyone who sees your words can take your bitcoin, from anywhere in the world, and you can't reverse it.

Write them by hand, in order, and double-check every word.
Consider stamping or engraving them into metal, which survives fire and flood.
Store them somewhere you'll find in 20 years but a burglar wouldn't look.
Think about a second copy in a separate secure place, so one fire or flood can't wipe you out.

Never

Photograph them, or save them in notes, email, cloud storage or a password manager.
Type them into any website, app or form. A real wallet only asks when you are restoring it yourself.
Share them with "support" staff. No genuine company will ever ask for them.
Use words that came pre-printed in the box. That device is compromised.

Some wallets let you add an optional passphrase, an extra secret word on top of the 12 or 24. It protects you if someone finds your words, but if you forget the passphrase, your bitcoin is gone. It's a feature for after you're comfortable with the basics.

Step by step: moving to a hardware wallet

Buy it new, directly from the maker
Order from the manufacturer's own website, typed in yourself. Avoid marketplaces, second-hand devices and third-party resellers: in 2026, tampered devices sold by a reseller drained customers' wallets (see below). Check the packaging is sealed when it arrives.
Set it up yourself
The device should create brand-new recovery words in front of you. If the box contains words already, or the device arrives set up, don't use it.
Write down your words and check them
Copy all 12 or 24 words in order. Most devices ask you to confirm some of them; use any backup-check feature it offers before putting real money on it.
Install the companion app safely
Use only the link on the maker's own website. In 2026, security researchers found more than two dozen fake wallet apps in Apple's App Store designed to steal recovery words.
Get a receiving address
In the app, choose "receive". Check that the address on your computer or phone matches the one on the device's own screen. The device screen is the one you trust.
Send a small test first
Withdraw a small amount from your exchange to that address. Wait until it shows up in your wallet. This proves the whole path works before anything important is at stake.
Send the rest
Repeat for the remainder, checking the address on the device again. Moving bitcoin between your own wallets isn't a taxable event; see our tax guide.
Put the device and the words in different places
The device is protected by a PIN; the words are not. Keep them apart, so finding one isn't enough.

When the hardware wallet itself is the problem

A hardware wallet is still the safest common way to hold bitcoin, but it isn't magic. Three incidents in 2026 show the ways a device can let you down, and what protects you from each.

Tampered devices from a reseller (Ledger, October 2026)

Customers who bought Ledger devices through CryptoBilis, a third-party reseller in Southeast Asia, had their wallets emptied. Ledger confirmed a hidden hardware implant that captured recovery words as they appeared on the screen and sent them out over a mobile data connection. A tampered device examined by a security researcher still passed the maker's built-in authenticity check. On-chain investigators put losses at more than US$86 million. Ledger says devices bought directly from it were not affected. A German electronics chain has also paused Ledger sales while a separate reported case is investigated.

A flaw in the device's own software (Coldcard, July 2026)

A firmware build error dating back to 2021 meant some Coldcard devices created recovery words with far too little randomness. Attackers could guess them without ever touching the device, and stole more than US$100 million in bitcoin. Buying direct didn't help here. The fix was to update the firmware, create new recovery words, and move funds to them.

A fake security alert (Coldcard, October 2026)

On 11 October 2026, attackers took over Coldcard's official X account and posted a fake "critical vulnerability" notice telling owners to move their funds through a phishing website. Anyone who typed their recovery words into that site would have handed their bitcoin to the attackers.

How to protect yourself

Buy directly from the maker's own website, typed in yourself. Never second-hand, from a marketplace, or from a deal that looks too cheap. In the 2026 tampering case, the maker says its direct sales weren't affected.
Inspect it on arrival. Sealed packaging, no PIN already set, no recovery words in the box. Remember that an authenticity check can't catch everything.
Update firmware only through the maker's official app, and check security news on the maker's own website, not on social media posts or links someone sends you.
A genuine security notice never asks for your recovery words. If you need to move funds, you do it from your own wallet to a new wallet you set up yourself.
If your maker confirms a problem with your device, set up new recovery words on a safe device and move your bitcoin, starting with a small test.
For larger amounts, consider multisig with devices from different makers, so one faulty or tampered device can't empty your savings on its own.

We name these makers only because the incidents are public and directly relevant. We don't recommend, sell or take fees from any wallet maker. Figures are estimates from on-chain researchers and may change as investigations continue.

How people actually lose bitcoin

The bitcoin network itself has never been successfully taken over. Losses almost always come from one of these.

Giving away their recovery words

To a fake support agent, a fake wallet app, or a website that looks like the real thing. The words are the bitcoin; whoever has them can take it.

Losing the only copy

A single sheet of paper in a drawer, lost in a move, a fire or a clean-out. Make your backup durable and know where it is.

Sending to the wrong address

Bitcoin payments can't be reversed. In a scam called address poisoning, criminals send tiny amounts from look-alike addresses, hoping you'll copy one from your history later. Always get a fresh address from your wallet and check it on the device screen.

Telling people they own it

Physical "wrench attacks" on crypto holders hit a record in 2025: about 70 reported worldwide, up from about 41 the year before. Don't advertise what you hold, online or off.

Dying without a plan

If nobody knows your bitcoin exists, or how to reach it, it's gone for your family too.

Make sure your family can inherit it

In New Zealand, once someone applies for probate, the will becomes a public document: anyone can search for it and request a copy from the High Court. So never write your recovery words, PIN or passphrase in your will.

A common approach instead:

In your will: say that you own bitcoin and who should inherit it, without any secrets.
In a separate letter of instructions: what you hold, which wallet you use, where the device and the recovery words are kept, and the steps to restore it. Write it for someone who has never used bitcoin.
Kept safely apart: make sure the right person can reach the letter and the words when the time comes, but nobody can get both early.
Checked: ask yourself whether your executor could follow it without you. Update it when anything changes.

This is general information, not legal advice. A lawyer who drafts wills can help you set it up for your situation.

Questions people ask

What happens if my hardware wallet breaks or gets lost?

Your bitcoin isn't stored on the device, so it isn't lost with it. Buy a new compatible wallet, enter your recovery words, and you're back in control. A PIN protects the old device from whoever finds it; if you're worried, restore on a new device and move your bitcoin to fresh words.

What if the company that made my wallet goes out of business?

Because almost all wallets use the same standard recovery words, you can restore your bitcoin with another maker's wallet. You don't depend on the company surviving.

Do I need a hardware wallet for a small amount?

Not necessarily. Many people start with a phone wallet app while they learn and move to a hardware wallet as their savings grow. The same rules about recovery words apply either way.

Is moving bitcoin to my own wallet taxable?

No. Inland Revenue says moving cryptoassets between wallets, addresses or accounts that all belong to you is not a disposal.

Can I keep my recovery words in a password manager?

We don't recommend it. Anything stored online can be reached by anyone who breaks into that account. Keeping the words offline, on paper or metal, means a hacker can never reach them.

Should I keep some bitcoin on an exchange?

That's your call. Some people keep a small amount they plan to sell on an exchange, and their long-term savings in self custody. The more you hold, the stronger the case for holding it yourself.

Not your keys, not your bitcoin.

Take the first step with a small amount. Once you've done it once, it's as routine as a bank transfer.

How to buy safely Read the full guide

Sources

Written by Anand. Last updated 14 October 2026. Spotted something wrong or out of date? Send me a message and I'll fix it.