Why You Don’t Leave Crypto On Exchanges

Is a centralized exchange the best place to store your crypto? More importantly, why isn’t it a good idea, and what are the alternatives? Let’s dive into these questions so you can minimize risk and keep your crypto as safe as possible.

https://odysee.com/@ScottCBusiness:4/Withdraw-Your-Crypto:8

Reasons People Use Centralized Exchanges:

·         Ease of use - It’s easier to do everything in one place.

·         Familiarity - It’s more familiar to stock market trading, ownership, and custody.

·         Feature-rich - Trading with leverage, options, shorts, longs, margin, derivatives, futures, etc. typically requires a centralized exchange to facilitate. Trading with leverage can help reduce custody risk too.

·         More convenient - Exchanges with a wide variety of altcoins allow you to easily hold everything in one place while withdrawing these may be very painstaking and require many different crypto wallets.

Reasons Why To Avoid Centralized Exchanges:

·         Security & ownership – You actually own everything and have full control and security over it.

·         Centralization & gatekeeping – You have to ask them to do anything, they could require more. identification like your ID for KYC. I’ve had to previously reKYC and wait days to withdraw funds.

·         Targets for hacks – They are much bigger targets for hacks and social engineering than individuals.

·         Future regulation – They could be affected by future regulation

·         Lack of regulation – This allows for a lot more sketchy things to happen and enables perpetrators to more easily get away with it.

·         No insurance – None of your funds are insured on these platforms anyway, so it’s not any better than keeping it yourself.

·         Malicious behavior – No exchange or institution is perfect and above questioning.

Examples:

·         Shakepay – Sell above market price and buy below market price to you with the allure of “shake pay” to shake your phone to earn cryptocurrency.

·         Binance, Huobi, & Poloniex - Were all involved in blocking funds to users and stealing them for a major governance shift and hostile takeover of the Steem blockchain in collusion with Justin Sun from the Tron Foundation.

·         QuadrigaCX – The founder stole everyone’s funds and supposedly died.

·         Coinbase – Requiring you to now KYC to continue using their platform.

·         Coinsquare – They were audited and gave users information for those with over $20,000 to the Canadian Revenue Agency for taxation.

·         Cryptopia being breached, shutdown, and now liquidating

·         Regulation – Regulation can change at any time, affecting your country and preventing you from using an exchange like with Binance & Kucoin here in Canada for specific provinces.

This isn’t just for exchanges but any product or service that requires you to give up control of your crypto including many gambling and crypto lending platforms. The key is to look for the use of smart contracts or some way that you are still the one totally in control of your funds and your access to them.

Conclusion

Your best bet is to store your crypto in a self-custodial wallet that you own and control. There are some wallets that allow you to trade cryptocurrency and exchanges that are non-custodial that you can use without compromise.

At the very least, your long-term holdings should be kept in a self-custodial wallet with offline storage methods like a physical crypto hardware wallet. I have reviewed a few wallets, but currently, I use the Ledger Nano X.

You can also do many other things to protect yourself like using a very strong password, using multi-factor authentication, using a VPN, never open emails related to your crypto or finances or click directly through email links, and using an email and password separate from everything else that has no identifying characteristics in the email like your name. There are many other things you can do, but this is a great start.

Check out the chart on this site that explains over 12.6 billion dollars have been stolen since 2011 as of September 2018 when adjusted for inflation: https://hackernoon.com/the-12-6-billion-black-hole-are-your-assets-protected-7ee34d9c810e

They also state that “exchanges lose $2.7 million every day on average, and this figure is set to increase in the future.”

I will do a review of all the centralized exchanges, decentralized exchanges, swap exchanges, and wallets eventually so stay tuned!

Do you leave crypto on exchanges? What wallets do you use? Let me know what you think about this in the comments below and don’t forget to subscribe!

*Disclaimer: This is not financial advice and is purely for entertainment purposes. What you see, hear, or read is my personal opinion, and any statements made are based on my views and should not be misconstrued as fact. My crypto portfolio may or may not be simulated*