storage options for MacBook Air

Scar972, It can make a difference if your external (mechanical) storage is acoustically noisy.  Other than that your DAC has asynchronous (I believe) input, meaning that timing of the computer and DAC are separated.  What you send to DAC is data - not the music (you can use computer at the same time).  Music is recreated in the DAC by added timing (separate clock for D/A conversion).  I would not transfer files to SSD drive for two reasons.  First is better flexibility of external storage and the second is the fact that it can make your SSD last longer.  Your SSD has limited number of writes for each sector.  In order to extend it drive constantly reshuffles sectors to minimize the use of each sector.  The more free space you have the more years it will serve you.  Don't forget to make backups.  I make two backups to prevent situation when something bad happens during backup destroying both disks.  In addition my second backup, that I keep at work, gives me protection from fire, theft etc. 

Hello Scar972 - I have a MacBook Air and just moved to an Aries Mini for playing ripped files and streaming Tidal, Spotify and internet radio.  My music files are ALAC in iTunes and are on an external hard drive (plus backups).  Space being limited on the SSD of the MBA, I went external.  I could not tell a difference sound wise.  It should be easy to do the A/B comparison and decide for yourself.  I will say, if prices for solid state come down, I'd prefer to use solid state for storage over a mechanical hard drive.  Just seems the better tech for quickly transmitting data...whether or not it improves sound.  

Back to the MBA...I was also using BitPerfect ($10 from the App Store) to run things.  I highly recommend it for improved SQ over "native" iTunes if you stay with the MBA.  Also, if you go to an external hard drive for storage you can experiment with other formats besides AIFF...ALAC and WAV, at the least since space won't be an issue.

FWIW, the Aries Mini reads all my iTunes/ALAC files no problem.  I still use the MBA into a Schiit Asgard 2 via Dragonfly for headphone listening late at night.  

Hope that's helpful.

+1 for BitPerfect 

Scar972, Ignore my argument about longevity of SSD. Music library doesn't add any burden since it is always read operation during playback.

The original question was to store music on an external drive or on internal drive. For 1, in time your ssd will be too small to hold all of your music. The 2nd issue is that hard disks are noisy to have in your audio room.
options? Plenty.
1) use a cloud drive (NAS drive essentially). This drive can be in another part of the house. I use the seagate central 5TB disk. used to use this for my Audirvana library from my Mac mini.
2) share a disk from another server. This is what I use now. Explained later.
3) hook up an external disk to your router.
4) I have a 2TB battery operated disk that holds part of my library. I mainly use this when I travel since my iPhone/iPad can connect to this drive wireless and the my iPhone/iPad connect to a cypher lab dac which sounds fantastic.

i stopped using iTunes for my music room years ago because no matter what software you used on the Mac to read the music. It didn't sound that good. When Audirvana 2 came out with its own library instead of using iTunes, music sounded much better. About 8 months ago, I started auditioning music servers and most that I heard bettered the Mac mini setup. 

So I replaced my Mac mini setup with the Auralic Aries. I since setup my Mac mini as an OS X server running minimserver. I have 15TB of hard disk on the Mac mini server using a raid 1 setup for 2 - 5TB drives for my music. I use Bliss that keeps the tagging and album art insync. This server is in the basement 2 floors away from my music room. I use the seagate storage central cloud disk to backup the OSX server.

bottomline, you have many options