Digital asset management is an area in crypto with much room for improvement; its two main issues are wallet exploits and poor user experience resulting from fragmentation.

Luckily, developers are now innovating to solve these issues. In this guide, we will walk you through the best and most secure ways to manage your digital assets with regard to your circumstances and investments.

Let’s begin.

*We will use the terms hot and cold wallets throughout this article. If you need clarification on what they are, check out our how to store crypto article.

What is Digital Asset Management?

Digital asset management refers to the buying, selling, storing and tracking of digital assets. Regarding crypto, these digital assets are non-fungible tokens (NFTs) and cryptocurrencies.

Digital asset management is crucial to ensuring your crypto activities are safe, and you have a higher chance of profitability.

How to Manage Digital Assets

Every crypto user will have a different way of managing their assets. For example, a day trader may keep most of their funds on an exchange and use an analytics platform to track their trading history. Conversely, long-term investors might hold all their assets in cold storage, and NFT traders may keep some in hot wallets.

Security and portfolio analysis are the two main priorities for digital asset management in crypto.

How and where you store your crypto is critical to successful digital asset management. Within the novel world of blockchain, there is a risk of loss and theft everywhere. Take the loss of billions in user funds on FTX or the recent hack of the Moonbirds creator’s wallet, incurring a $1 million loss, for example.

The second part of managing your digital assets is to analyse your crypto activity. Tracking your portfolio enables you to examine your performance and decision-making, refine your trading strategy and rebalance your portfolio.

There are numerous ways to do this, including using a crypto block explorer or checking your trading PnL sheet on a centralised exchange (CEX). But the most advanced method is using a crypto portfolio analytics tool.

How to Manage Digital Assets On-Chain

Hands down, cold storage is the best way to store your crypto. If you plan on holding digital assets long term, send them to your cold storage wallet, store the keys safely, and you can sleep well knowing your crypto is safe and sound!

These days, Ledger and other leading cold storage wallets support NFTs, too, so you can even store your non-fungible assets safely.

Moreover, you can connect your cold storage wallet to a portfolio tracker or automated tax software such as Cryptiony to analyse your holdings.

Right now, you can buy, sell, send and receive crypto directly from your cold storage; but if you want to trade more NFTs, exotic cryptocurrencies or use DeFi, things get more tricky. To do this, you need to use a hot wallet.

*The most important thing to remember when using a hot wallet is that your private keys are stored online, and connecting your wallet to a malicious website can result in your keys and crypto being stolen. So never click suspicious links and check social media to ensure the dApp you are connecting to has not been compromised.*

How to Manage NFTs

When buying and selling NFTs, the safest way to purchase them is directly from your hardware wallet. However, you can only do this when it is connected to a software wallet, such as Ledger Live or Metamask.

Many users prefer purchasing NFTs directly from their hot wallet at the sacrifice of security. If you buy with a hot wallet, send the NFT straight to cold storage afterwards.

When it comes to tracking your NFT portfolio, the most popular app is DappRadar, which allows you to track the price, profits and loss of your NFTs. But if you like data, it’s worth checking out NFTBank, which provides a more expansive suite of portfolio analytics such as revenue, spending, ROI and an activity log.

How to Manage Exotic Cryptocurrencies

Some call small market cap coins the crypto casino; others have slightly less friendly terms. But one thing is for sure, trading them is always fun.

Some smaller altcoins may not be supported on your cold wallet, or you might not plan on holding them for a very long time.

In this case, you would purchase and store them with your hot wallet, like Metamask. You can buy and sell them by connecting your hot wallet to a decentralised exchange such as Uniswap for Ethereum or Pancake Swap for Binance.

The best way to track your hot wallet portfolio is via the Cryptiony app. You can calculate your taxes and track your PnL for all wallets and exchanges – from one easy-to-use dashboard!

How to Manage Defi Digital Assets

When it comes to managing your digital assets, it rarely gets more complicated than DeFi, especially for yield farmers. Many users stake and lend their assets on different protocols to diversify and maximise profits. Without the right tools, tracking which protocols you have deposited assets on and their profitability is a nightmare.

Thankfully, this issue has been addressed by many developers, with some seriously innovative solutions arising as a result. For example, Ape Board allows you to track your staking activities from over 450 protocols and find the best opportunities to earn from. Some other excellent DeFi portfolio tracking options include Auto Farm and Zapper.

Manage Digital Assets on a Centralised Exchange

The issue with centralised exchanges is that they have custody of your private keys, so have complete control of your crypto. The collapse of FTX and other key industry players is a reminder crypto must remain trustless.

As a rule of thumb, it’s best to use centralised exchanges only when necessary. This can include:

  • Fiat on-ramping.
  • Leveraged trading.
  • When gas fees are high on the Ethereum network.

But when possible, use a decentralised exchange, secure cross-chain aggregator, or even a perpetual decentralised exchange.

With that said, there are benefits to using a CEX, such as lower fees, fast execution, high liquidity, seamless cross-chain swaps and access to a range of trading instruments.

When using a CEX, it is best to store only the assets you are actively trading on the platform and send long-term holdings to cold storage.

Finally, the best way to track the performance of your digital assets on centralised exchanges is via the Cryptiony integration. You can connect exchanges to Cryptiony via an API connection, and the automated software will calculate your profits and losses in real time and generate a tax report.

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The most important thing to remember when managing digital assets in crypto is to ensure your wallet’s private keys are stored offline in a hardware device. Keeping them online could cost you your crypto.

Secondly, by enabling you to refine your strategies and rebalance your portfolio tracking crypto transactions plays a massive role in your long-term profitability.

The easiest way to track your transactions is through Cryptiony. You can carry out portfolio analysis and receive automated tax reports from our integrations with all the major cryptocurrency exchanges and wallets.