The world of crypto is undoubtedly growing, but that doesn’t mean it’s getting safer.
It’s getting smarter, faster, and, unfortunately, more dangerous.
$2.2 billion was stolen from crypto platforms in 2024, with most losses coming from hot wallets and DeFi platforms.
As crypto scams evolve, so must your security.
If you don’t fully control your wallet and backup, your crypto isn’t really yours.
That’s why you must check crypto wallet risk levels to make smart choices.
Not Just Theoretical: Real Examples of Wallet Risks
| Incident | Date | What Happened |
|---|---|---|
| Atomic Wallet Hack | June 2023 | Over $100 million was stolen because of a vulnerable software update. |
| Ledger Connect Kit Exploit | December 2023 | Hackers implemented malicious code into the Ledger tool, draining connected wallets. |
| FTX & BlockFi Collapses | 2022–2023 | Users lost access to their funds after these centralized platforms went bankrupt. |
Take the Free Crypto Wallet Risk Test
Your crypto might be worth thousands, or even more. But is it actually safe?
Take this quick test to check your wallet’s risk level.
This wallet risk test is designed to pinpoint the biggest weaknesses in your current setup, based on how your crypto is stored, protected, and accessed.
→ Explore Material Bitcoin Cold Wallets
Want to Check Your Wallet?
Use our free tool to check your wallet balance and status. No login, no risk, just clarity.
Main Risk Factors You Need To Evaluate
Your wallet setup is only as strong as its weakest link.
Some of the main factors that determine whether your crypto is truly safe or exposed depend on a few fundamental features.
1️⃣ Custodial vs Non-Custodial Wallets
One of the first decisions that affects your wallet’s risk level is whether you are using a self-custodial or custodial wallet.
Self-Custodial vs. Custodial Wallets
| Wallet Type | Description | Examples |
|---|---|---|
| Custodial Wallet |
☝️Remember: “Not your keys, not your crypto.” |
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| Self-Custodial Wallet |
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👉Tip: For top safety, especially with larger crypto assets and long-term storage, always opt for self-custodial wallets.
2️⃣Hot Wallets vs Cold Wallets
Hot wallets are connected to the internet, always.
This makes them convenient but vulnerable to hacks, malware, and phishing scams.
Cold wallets are offline.
These include hardware wallets like Ledger and KeepKey or physical options like Material Bitcoin.
Since cold wallets are never exposed to the internet, they’re highly secure.
3️⃣ Private Key Management & Recovery
Your private key or recovery seed is the only way to access your crypto.
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Lose it, and your funds are gone forever.
Expose it, and hackers can steal your crypto in seconds!
Best Practices:
- Never store your seed phrase digitally (no screenshots, notes apps, cloud storage, or email).
- Never share it with anyone. Keep in mind that no legitimate platform will ever ask.
- Use physical backups like Material DIY. This protects against fire, water, and tampering.
How to Spot Warning Signs of a Risky Wallet
Even if your crypto wallet seems secure, there could be some hidden vulnerabilities that put your Bitcoin at risk.
Spotting these red flags early can help you prevent loss and make effective changes ASAP.
Major Red Flags You Shouldn’t Ignore
🚩Electronic Wallet With No Two-Factor Authentication (2FA) or Password Protection
If your electronic hardware wallet or exchange account doesn’t provide 2FA, then it’s highly vulnerable to unauthorized access.
⚠️Warning: Be mindful of SMS-based 2FA; it can be prone to SIM-swap attacks.
This is not a factor in non-electronic physical storage, as there are no screens, apps, or devices to link to; you never need to worry about authenticating your account.
🚩🚩Incomplete or Missing Backups
If you haven’t saved your seed phrase or have stored it digitally, then your backup is fragile.
Use physical backups like metal recovery wallets.
🚩🚩🚩Custodial Risk
If you’re storing crypto on custodial online platforms, then you don’t own the private keys.
This creates exposure to third-party failures, freezes, or insolvency (if the organization ceases to exist).
➡️If you can’t access your seed phrase, you’re trusting someone else to hold your crypto.
🚩🚩🚩🚩Wallets That Use Browser Extensions
Browser-based wallets like MetaMask are convenient but super vulnerable to phishing attacks, false browser plugins, and malicious pop-ups.
Always double-check URLs, avoid clicking links in emails, and if you really want to use these types of platforms, pair your account with a hardware wallet for safer transactions.
When You Should Move Your Funds Immediately
There are moments when you might need to act fast.
If you experience any of these, you should move your crypto assets quickly without hesitation.
✔️ Your wallet shows logins or transactions you didn’t authorize, or you notice access from unfamiliar IP addresses, your wallet is most likely compromised.
✔️ If a custodial provider suddenly stops withdrawals, delays support, or is under regulatory investigations, that’s your cue to exit.
✔️ Your seed phrase has been exposed online, whether by accident or due to a phishing scam; assume your wallet is no longer secure.
What to Do If Your Wallet Shows Risk
If you notice signs of vulnerabilities, don’t wait any longer.
Taking action and changing to a secure cold wallet and backup will protect you from possible loss or theft.
Here’s what to do:
- Transfer your funds to a cold wallet.
- Move your crypto into a self-custodial cold wallet, one where you control the private keys.
- Revoke smart contract permissions.
- If you’ve ever connected your wallet to DeFi apps, revoke unused token approvals.
- Regenerate your wallet if it’s compromised.
- If your seed phrase has been shared or saved digitally, make the assumption that your wallet is unsafe. Create a new wallet, transfer your funds, and store your new recovery phrase offline.
Safer Crypto Wallets for 2025
Using an expert-recommended secure wallet to help protect your crypto in 2025 is vital.
Material Bitcoin is a tamper-proof steel cold wallet that stores your private keys offline.
It’s ideal for long-term holders who want maximum protection without electronics or software vulnerabilities.
FAQs
How often should I check the risk of my wallet?
- At least quarterly, or after any major crypto platform breach or software update.
Is a balance checker enough to assess my wallet’s safety?
- No, balance checkers show funds, not security. You must audit key access, network exposure, and backup protocols. But a balance checker is a useful key to managing your crypto’s movements.
Can I eliminate all crypto wallet risk?
- No system is 100% risk-free. But cold wallets + safe backups + no internet exposure = near-total security.
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