Bitcoin Forum

Every day it seems a new story emerges about an exchange going bankrupt. Has been a recurring pattern since the Mt. Gox collapse. Why, with so many examples of failures, do people continue to keep their money on these? You don't own crypto if you have "coins" on an exchange, you have an IOU from a business that may or may not even be solvent.

It's good to see recurring threads about this same mistake to maintain awareness. But, the more it appears on forums and medias people still keep blind ears to it. And such people pay the price when the exchange collapses or go bankrupt. Also, they'll be the first to complain about how scammy cryptocurrency is to them. Certainly, with the information in circulation about the risks involved in keeping funds on exchanges the victims of these bankruptcy and disputes can be said to have self imposed the problem they are facing.

the traders keep theirs on exchanges because they are on the lookout to make money on opportunities like the FTX bankruptcy. you wanna sell fast when the price plummets going to $16k, that's the advantage but they are also risking when the exchange pauses withdrawals.

if you don't care of prices going down and you want to be on the safer side, take your coins out the exchange.

Despite several occasions of giving warnings about how centralized exchanges could place a risk on users from having access to their coins or leaving them bare to data leakage without any form of privacy, yet this exchanges finds thier ways in to newbies who couldn't bot differentiate thier difference, while most often those that engage on trading also make use of the centralized exchanges, but leaving their little amount of asset in them, these centralized exchanges may still exists but their relevance would have drop drastically whereby many of them could have cease from operations just like in the case of the example you stated

Your wallet have a risk for getting hacked. It doesn't matter if it's from exchange wallet or your own local wallet, there is a chance for something happens if you do something wrong during certain date. The way of people or companies to secure the wallet are another factor to determine which is safest or not. Treat everything has a risk and you will become really careful when doing anything especially involved with money.

Yes.

It's still that there are many people that do keep their funds on exchanges. And they don't know until when an issue about them is going to pop just like what happened for FTX.

While there's no issue yet, they're just leaving it there as if there's really no problem at all. But it's true that, you never hold your keys there if you allow them to keep it for you.

One of the reason i can think of as to why people still let their coin be on an exchange is that they are ignorant. I have a friend who is new into Crypto-currency and still lacking some knowledge, he knows about bitcoin and how he can buy coin on exchanges like binance but still don't understand the dangers of leaving his coin on the exchange. He has lots of coins on his Binance account not only I told him about the dangers.

I think we can tell people about the dangers of leaving their coins on exchanges and by this we can help reduce such illiteracy.

Honestly I am starting to believe this as well now. I fact I would say buying coins is not safe at all. First LUNA and now FTT, it really looks as if Cryptos are made of nothing but a bubble, a fictitious demand created on a dramatic idea which exists only in theory when it faces a slightest of practical challenge it just bursts. I feel one should only hold decentralised Cryptos only and not even touch the Cryptos where exposure of a single entity is more than 20-30%. I feel this is the only way to be safe in this market otherwise be ready to lose your hard earned money.

A lot of people don't trust themselves to hold onto their own funds.  They figure the people running the exchanges are professionals and wouldn't do dumb things with their money.  FTX showed that isn't the case.  It's amazing to me that Sam managed to get himself more than 15 billion dollars in wealth and it still wasn't enough to keep him happy and stop him from doing stupid things with customer funds.  It absolutely amazes me.  The amount of damage that has been done to the industry by these selfish get rich with other people's money types is immeasurable.  If the average person cannot trust anyone to custody their funds for them, crypto can't go mainstream.  The same reason people keep their money in a bank instead of under their mattress. 

People are irresponsible and uneducated. Pretty much that, summarily. To do self-custody, one needs to spend some hours to study how things work, how wallet software work, learn security tactics, ask / search for questions, have questions etc.

I can't believe this idiot is so rich: https://twitter.com/DU09BTC/status/1586269255162478593

The fact is that some people are very big risk takers, they don't let their coin be on the wallet where they cannot use it to try their luck in some coins.
They always look out for opportunities in exchanges where they could increase their portfolio and this opportunities come within a short period of time. Before they will transfer their coins from wallet to exchange the opportunity has gone, that is why people still keep their coins in exchange to enable them be dynamic and take risk

The right to one's own opinion is a universal one. No matter how a warning is spread, not everyone would heed it because nowadays people act very irrationally. Lack of understanding and occasionally placing too much trust in such exchanges, particularly those that have never experienced bankruptcy, are further factors contributing to people's strong attachment to retaining their money in an exchange. Before taking preventative measures, one does not wait to become ill with a certain condition.

You are right but if you are a short term trader you do not really have too much of a choice, since it would not make a lot of sense for those people to withdraw their coins at the end of their session only to deposit them at the beginning of the session the very next day, so those people need to take the risk of storing their coins at an exchange, however those which are not really traders and are using the exchange as their personal wallet are without a doubt making a huge mistake, and they could end up paying a huge price just because they were too lazy to create their own wallet.

Nothing new but there are still lots who had been mainly affected on the time comes where these platforms do really experience huge problems.
It had been suggested and been advised for how many times that its never been ideal on leaving your coins on an exchange, no matter how reputable and popular it would be
which there would be always the risks of this situation.
Its never been safe since on the first place thats why storing up huge amounts of money is never been recommendable.Its the basic but still people do really end up
on leaving their funds.Its never been safe but there are instances which we do really like on storing it there, even myself.  :P

In the end, the only way to be 100% sure that your crypto is safe is to remove it from an exchange and store it in a wallet where you control the private keys. One just needs to look at the exchange situation over the last few months to realize that this is nothing new or surprising. Businesses offering these services are simply not prepared for a rapidly fluctuating market. Nor are they prepared for the security risks of managing so much money. It is no wonder that they have failed in large numbers when dropping hundreds of millions in a week is a common occurrence in this market. That being said, you're still going to need to trust someone at some point; we haven't had a string of successful DEXs yet really get off the ground, so we'll see how those pan out in a year or two.

I've created similar thread before Recent event: Stay away from centralized exchanges (FTX, Binance, etc), use DEX (https://bitcointalk.org/index.php?topic=5420048.msg61262231#msg61262231), this is why "not your keys, not your coins".

Never hold any coins inside the exchange since you don't have full control over your coins, just bought a hardware wallet e.g. Ledger or Trezor, better safe than sorry. Maybe this problem currently happen on FTX, but who knows in the future Binance will did same since they've a problem or get hacked. Centralized exchange is very vulnerable, it's just a fake statement if their exchange's security is very high.

It’s not so cut and dry. Keeping it at home or in some secret bank vault has its own risks, people can steal it(which they only need to copy the key you won’t even know until the coins are gone), it can burn down, your phone/private wallet can get hacked, cold storage access is severely limited which creates more risk if you need to keep getting the paper key every time etc… you can make backup and put it somewhere else, but that just opens up another point of exposure.

It all depends on your situation, if you live alone in a concrete house where no one has access, then yes keep it yourself, but most of us aren’t in this situation.  

Life is all about risk management, this is no different. Any exchanges outside of us regulation or foreign owned is a definite no, coinbase despite all the hate I think is pretty safe as they are us listed company and well regulated. Their risk management is also well defined. Can it still go down? Of course, is it likely to happen? Probably not.   Is it safer to keep your crypto there vs at your home safe? Only you can answer.

actually it is not about Keeping money on exchange but how we need to use them , while there are some mixer to hide our identity yet exchange is important to all of us who trade and make this for a living.

I still use exchange but not as common as before .

Now if I only need to transact for certain coin that available in Binance directly to my local wallet, then yes binance is what i use.

For sure, it's the most convenient way to access your funds, with easy access, you just need your email and password compared to using a personal wallet where you need to secure such things to make it secure but I don't agree with people that use their exchange account to store funds if they are not touching it at all, better to use personal wallet where you control it.
Crypto exchange must be only be use when trading so what's on your crypto account must be your funds that is for trading only not savings.

Exactly, people who leave their money on the exchange they are not holding but because they are looking to profit through market volatility but unfortunately things have gone awry, which no one can predict before can. After Binance announced it would buy back FTX, the market reacted positively but then they changed their mind and the market started to fall, everything happened within 24 hours. Everything happened so fast that investors did not have time to react.

Once we have joined the market, the risk is always lurking for us, if we don't lose when investing, if we don't get hacked, our account will be locked by the exchange. Always invest with money you can lose.

In that matter we do not hold the decision of the investors here in cryptocurrency, it is their choice whatever they want to invest dude. Besides, cryptocurrency in the first place is full of risk and we knew that and maybe few don't know it.

Now if there are still people who are leaving assets in the exchanges here in the crypto space, maybe they are ready to face the risk they are taking, dude. I also have assets in other crypto exchanges but I'm not worried. After all, I know what I'm getting into even though, despite everything, it has risks because I'm a risk taker.

It's interesting to see https://rekt.news as they show almost daily hacks of different projects, platforms, exchanges, etc.

https://i.imgur.com/CjWYUPT.png

And meanwhile, bitcoin continues generating block after block...

Keeping your coins in an exchange defeats the purpose of using Bitcoin. You don't want to have intermediaries, that's the whole point.

Cex won't be safe ever and it seems to exchange native coins also wouldn't be safer even if you hold on to your hot wallet. How will you do with the token if it becomes zero? Tokens of native exchange would become zero anytime due to any reason that we have seen about FTX coin. We have to take a lesson from history and have to be very careful with our funds. It's crypto and anything could happen at any time whether something good or bad. So holding funds on exchange is never safe and holding native coins also never safe.

I think it's because people expect to be able to sell their coins in a short time at the highest price and then they will withdraw the profits all at once. But they don't understand that it won't always be the case and that's what makes them keep most of their coins in exchange for a long time. And when cases like Mt.Gox happen again and their accounts get impacted, they regret keeping their coins on the exchange. This shouldn't happen to us because we have to be responsible for our coins, so maybe sending them to another wallet would be better.

Unfortunately this is true, the FTX exchange incident is not the first of its kind and it will definitely not be the last. There have been many similar incidents in the past and more will happen in the future, but on the other hand people need to deposit their money in the exchanges in order to be able to trade and get some profits, So what is the solution? The best solution in my opinion is to put a small portion of the capital into the exchanges to trade and keep the rest as a safe bitcoin wallet. In this way the loss can be reduced to a minimum.

With danger comes opportunity, put it on the exchange to make a fortune at the right time. Most people choose to put it in the exchange, which is also a manifestation of their trust in the exchange, and no one thinks that a large exchange will fail. But each of us should think about the consequences. Every choice is made by oneself, so the consequences must be borne by oneself.

Or you are not in possession of real Bitcoin/Cryptocurrency if you do not possess the secret keys/phrases that can be used to access and use the cryptocurrency on wallet that allows you to control and use the keys safely on its platform

"safely" & "on its platform" is against Bitcoin safety.

There are several possibilities why people are more comfortable to store funds on exchanges than in my personal wallet in my opinion, the main reason makes it easy to make transactions while experiencing an increase.
And I think wherever we save funds we will never safe , if we are not careful. Crimes will definitely exist and the partnership in us is also not avoided

I think MT. Gox time didn't teach lots of people so much sense or perhaps they forgot so early that it happened 8 years ago but the situation is not different with SBF and FTX, Sam was an Id!ot for using customer's money for strategic partnerships but even at that, there were so many red flags that beg so many unanswered questions like where they were getting all those millions from, not that the fees are enough to generate such revenues for those purchases and partnerships but people were all quiet and didn't withdraw their assets.

Bitboy was ranting the other day shouting at SBF for lobbying the top US office but so many people were using that as common discussion and laughing instead of being concerned, now that the did have been done, they have to learn the hard ways not to leave their Bitcoins on exchanges, the movement has always been not your keys, not your coins. I hope this mistake is the last one we would have in the crypto industry because it's killing the hope of investors.

I agree with  OP opinion about exchange market is not safety place for saving coins assets, however trusted with exchange market and have good reputation we can't expected about how long they can be trust when saving assets at some exchange market. Looking on cases happened with FTX exchange market after get problem with Binance exchange, have issues with withdrawing paused and not process yet.

I don't believe with exchange to hold coins for several years later, better save and hold coin in hot wallet like metamask, trustwallet or used hardware wallet if want secure hold coins.

Or you can also at the end of the day after completing all the trades, you withdraw all to your non-custodial wallet. This will take time and a bit of fees but it is obviously safer to leave funds on centralized exchanges. We cannot stop using CEX, unless DEXs provide us with similar services.

Yes, this option can be good sometimes but not always, because in addition to the time and fees as you mentioned there is also another problem because sometimes you have an open deal and the price of the coin is down so you can't close the deal and lose your money so you have to wait a few days for it to go up The price of the coin and you can sell and close the deal, so I find it difficult to withdraw your money to a safe wallet on a daily basis at the end of every day.

Previously, I was a fan of holding my coins on exchange platforms, but frankly, after I saw a lot of platforms that were hacked and declared bankruptcy, I decided to hold my coins in cold wallets like Ledger Nano X. I see that my coins will be much safer than holding them on exchange platforms because cold wallets are not connected to the Internet And no hacker can access them other than hot wallets and exchange wallets if you like to save your coins on an exchange, choose Binance, but you should not keep all your wealth on it.

I haven't been following crypto exchange news lately, but I agree with the op that there's always a risk there. Less reputable exchanges can have bad security and get robbed or perform an exit scam. More reputable exchanges might still face issues due to mismanagement of funds or a security breach. On top of that, there are increasingly new and new KYC requirements for those who want to use crypto exchanges. Meanwhile, it's quite easy to just install Electrum wallet, generate a seed, create a password if a person wants an extra albeit probably unnecessary layer of protection and be the sole owner of one's coins, no KYC or anything else required.

Well you need a few coins on exchanges if you do business with quite a few companies that only take coins for payments.

If you DCA long term you need an exchange to buy the coin.

say you have 5000 usd on coinbase and it is for doing a 200 a  week dca buy of bitcoin.

you can pull the btc off every 5 buys and self custardy it.

So your risk of losing funds is greatly reduced.

Plus the usd cash on coinbase is insured by the fed government if you are USA based.

Human nature.  It's often either greed or laziness. 

Lazy people think it's too much effort to manage their own keys and keep secure backups, so they place trust in total strangers on the internet to do it instead.  It strikes me as madness, but people like that definitely exist.  As a very rough generalisation (I know it doesn't apply to everyone), people seem to prefer convenience over security.

And greed causes people to come to terms with the realisation that, while you're holding your own keys, it's more difficult to gamble by day-trading altcoins and other tokens.  It's easier to again trust total strangers on the internet.  Supposedly a risk worth taking because the potential for profit is too tempting to resist. 

I used to do it with small amounts, but I don't anymore.  I never had coins on Gox, but I was right here when it collapsed and witnessed the fallout first hand.  That event definitely instilled some caution into my mind.  Not sure why it didn't have the same effect on others.

Crypto exchanges are created to exchange and trade our coins from one coin to another.  It is not meant to be our personal wallet.  So anyone using it as a personal wallet is in for a possible rekt when the cryptocurrency exchange is hacked, turned scam, or got bankrupt.  So let us remind ourselves and the people around us to no treat exchanges as personal cryptocurrency keepers.  Send only coins that are meant to be traded and leave only coins that are on order and make sure to turn on notification so that once the order is fulfilled, we can immediately withdraw the cryptocurrency to our own wallets.

Well, we tend to believe or hope that it won't happen to us. In my opinion, we use exchanges out of comfort. They are relatively simple to set up and provide you with a wide range of capabilities.Exchanges such as Binance or CEX.io go as far as having investment plans, staking functions, and saving functions. On the one hand, I feel relatively safe on Binance; however, everyone is guilty until proven innocent. You never know what might happen to the exchange, but even if Binance went bankrupt, which is unlikely, it would have a huge impact on cryptocurrencies.

From what I've understood, can someone be absolutely safe? I'm storing bitcoin on my computer through Electrum; how safe am I? How can you store cryptocurrencies when using DeFi projects and being involved in staking? Metamask doesn't look too safe to me.

I believe it isn't bad to use crypto exchanges if we are to trade, or even leave coins that are intended for trading. Leaving coin in an exchange will be an issue if we use it to keep our cryptocurrency because we never know what will happen in that exchange in the future.  I had a bad experienced regarding leaving coins in an exchange for a long time.  Since I trusted the exchange, it never occurs in my mind that the exchange would declare bankruptcy, they send notice to users but I failed to read it on time.  The time I read it, the allotted time for withdrawal request of funds I already expires.  My fault on not getting my self updated and my fault of keeping my crypto in exchanges, if only I kept it on my wallet, no matter how long that crypto is untouched, I will always have access to it.

Yep, there will be always news of a bankrupt exchange, it is ideally a warning for everyone to keep their coins in private wallets (not in the exchange wallets). However, not every individual who has crypto coins really understands and realizes the risks. Some of them may be beginners, others may be lazy to move their coins to private wallets because of the transfer fees. And some people may think that even if there is a problem with the exchange, as long as it is a trusted exchange like Binance, they will refund the customers' assets. These people will always consider putting their coins in exchange wallets, so the news of bankrupt exchanges won't work on them.

binance has their SAFU in place. so if anything happens, you have your insurance. don't know if FTX has that kind of feature. but in any case, we should not really store our funds in CEXs. however, if you are staking or availing the savings feature, i am more confident to use binance services. but in this market, we really don't know what will happen next, even top crypto-exchange like FTX can go bankrupt without a warning.

People never learn because they think that after it has happened, it never happens again or it doesn't repeat itself. They refuse to learn from people's experience. No matter how reputable an exchange seems, like they can never go bankrupt or be victims of hack, people who have not learnt this lesson should learn it never to keep their coins in an exchange when there are cold storages and safer places for them.

I said it the other day, but eventually this won't happen. Since, opening a centralised exchange in the first place will be considered a shady act, since there's no reason why peer to peer can become the mainstream trading route. There's the issue of escrow, and making it simple enough for people to use, and unfortunately I don't think multisig is the answer there due to the complexity that it adds to the transaction.

Ultimately, the only reason we tolerate, and don't learn our lessons about centralised exchanges is that they're by large very convenient due to the simplicity. It's one of the biggest questions you get asked by people who don't know about Bitcoin. "But, how easy is it to buy something with Bitcoin", which of course what they're actually asking is how easy is it to exchange, and turn into real (from their perspective) money. Centralised exchanges make it incredibly easy to do that within a few minutes.

However, peer to peer exchanges don't have that simplicity or speed. Unless, you've found a trusted seller, but even then you're likely ignoring certain security recommendations during the process. That's where we should be looking to develop, making peer to peer exchanges more convenient, and simple to use.

The only issue I see with peer to peer exchanges is governments not liking the idea of them, due to the fact that people could potentially money launder easily. Since, centralised exchanges will be reporting their books to the authorities, whereas peer to peer isn't doing that, it's down to each user to do that. Which of course, they/you should be doing, but the government will definitely see issue in the potential for people to cheat the system or go undetected more easily there.

Its been said for thousands or million times for sure that leaving coins on an exchange is never been safe but surprisingly which there are people whom do really leave out their funds on an exchange.

Some do even make it as their main wallet without even thinking up about the risks specially on these hacking incidents or other exchange issues that could possibly happen.There's no such thing about

100% safe when it comes to custodial platforms or things which we know that there's no way on recovering your funds once they do experience some problems.
I know its hassle to make out active deposit and withdrawals on exchanges but as able as you could then it would be always that recommendable.

That's something I actually didn't know. I guess having funds on Binance is safe-ish? However, quite a few members will disagree with that statement. Honestly, exchanges are much more versatile and user-friendly; Binance offers a mobile app and even a debit card. It's generally a great option, not only for beginners but also for experienced users.

I'm using Binance's savings and staking services, and while I'm planning to move to a decentralized platform, I find the whole concept of being able to trade crypto and invest it at the same time quite convenient.

It always happens again and again. Sometimes the loss is covered, sometimes it's not but most exchanges have their problems from time to time. You don't want to leave your money and ultimately your future in the hands of some random dude even if it's the "mighty" CZ.

People will never learn because there's more crypto users every year and those newcomers will once again repeat the same mistakes.

You can check my post from a year ago where I said that the biggest risk of trading is the fact that you have to hold money on an exchange.
https://bitcointalk.org/index.php?topic=5348828.msg57451823#msg57451823

A year later and one of the biggest exchanges implodes.

Once it's centralized nothing is safe but we can't stop using it, if you make profit from trading how will you profit if you don't use centralized exchange. Once invested means we take risks, so no matter how many exchanges fail, I believe we will never eliminate our reliance on them.