As part of the how to buy xrp process, whether a self-custodian wallet is necessary or not hinges on the needs of asset management following the acquisition. If all you do is buy on an exchange and keep it for the short term, the escrow wallet offered by the platform suffices. Nevertheless, for extended storage or huge positions, you must depend on an external wallet in order to boost security. Use Binance as an illustration. 2024 statistics show that over 60% of customers who purchased XRP chose to keep it in the exchange wallet (which supports instant trading and avoid cash withdrawal fees), but such an approach has platform risks – for instance, in December 2023, Bitget was hacked (losing 20 million US dollars). This led to the freezing of the user’s XRP for 48 hours, with a delay on withdrawals of up to 35%.
The option of utilizing a personal wallet is linked with cost-savings. Hardware wallets (such as Ledger Nano X, $149) will be able to store private keys offline, and the possibility of theft will fall to 0.0001% (by the 2024 CER Security report), but an XRP withdrawal fee needs to be paid (the average for the exchange is 0.25 XRP). Approximately $0.12 and the price of the transfer time (median online confirmation 3-5 minutes). Though software wallets (e.g., Trust Wallet) are not costing anything, private key leak risk increases to 0.05% in case the phone is malware-ridden (as compared to hardware wallets). With respect to minor transactions (e.g., 100 XRP, approximately $50), total expense of remaining on the exchange (0% custody fee + risk of withdrawal) can prove more efficient compared to self-custody (hardware expense is utilizing 298%). However, if one holds more than 10,000 XRP (about $5,000), the amortized yearly security cost (hardware amortization of $14.9) is only 0.3% of the holding value, lower than the theft chance of an exchange (the market average of 0.7%).
Operational complexity and regulatory compliance drive choices. The EU’s Crypto Asset Markets Act (MiCA) requires exchanges to insure users’ custodied wallets (at least 95% of assets) from 2025 onwards, but the median claim process takes 90 days (case: In March 2024 when FTX failed, users got only 32% back of their assets). For comparison, self-hosted wallets do not require the service of a third party, yet one has to store their own mnemonic phrases (12-24 words). According to Chainalysis’ study, worldwide permanent loss of XRP due to losing mnemonic phrases totaled 230 million US dollars in 2023 (accounting for 0.15% of circulation).
On-chain information reveals discrepancies in user behavior. By 2024, exchange address swaps accounted for 58% of on-chain XRP volume (a daily average of 1.2 billion XRP), and the individual wallet addresses had an average hold time of 17 months, significantly higher than the 22 days for exchanges. When the volatility of XRP (30-day annualized) is greater than 80%, then the top daily net outflow from exchanges worth 450 million is observed (reported after the victory by Ripple over the SEC in May of 2024), which shows that on high-volatility days, users are more willing to take their assets to self-custodians. In addition, involvement in staking or DeFi has to utilize non-custodian wallets – for instance, Flare Network’s airdrop campaign entails depositing XRP into wallets that are smart contract-supported (like XUMM), and such situations demand the utilization of self-custodian tools.
in conclusion, whether how to buy xrp needs a wallet is determined by the asset size, holding duration and risk appetite. Short-term investors (positions for <7 days) can employ exchange custody (99% cost saving), while long-term holders (>6 months) or heavy users (> $5,000) need to give precedence to hardware wallets (<1% security cost ratio). According to CoinMetrics data, the number of self-held XRP addresses increased by 27% year-over-year in 2024, reflecting the increasing awareness of asset sovereignty among users. But there is a need to balance the complexity of operations and the risk-return ratio.