Educated advice on the safest long term custody of fiat money during bull run

[Black_Sun]

A bit of context, I have been in crypto since 2017 and tried a number of different exchanges back in the days, but the despite the FUD that was surrounding Bifinex at the time, I was amazed at the quality of the platform conpared to others, even the largest ones were terrible, and still mostly are, I ended up almost only using Bitfinex. I'm not advertising it, just saying that's the platform I use, since it might influence your answer. In any case, we are in a bull run this year and I am slowly selling my crypto back into fiat and so my USD value is strating to become significant on the exchange and that worries me, so here is the question:

In the long term, what do you think is the safest? To keep USD on exchanges or to keep USDT, USDC... on my cold wallet?
The general wisdom is to keep your crptos on a cold wallets and that's what I do, HOWEVER USDT, USDC, etc. are not decentralized networks, they are companies. What if, in the next couple years, the US gov force USDT to shut down, sure my USDT will still be on the ETH blockchain, but they will be worthless or not tradable or worth only 0.6$, etc.. Or, what if USDT has a major bug or insolvency..? SO the point is, here are a few black swan type of scenarios where these would lose value.
On the other hand, although it is not advised, USD on major exchanges is "sort of" guaranteed by them, I guess... So isn't that actually kinda safer in the end?
Not looking for a perfect solution, I just want to analyse the risks, and learn.

Thanks!

[Findingnemo]

Based on your logic keeping it in the form of USD is better than any stable coin but I would definitely not recommend you to hold them on your exchange cause you know exchanges can be hacked at any moment even the greatest ones are not any exception to the hacks so why not just move the fiat back to your account and when you feel that you are at the bottom of the Bitcoin price then move back the USDT to Bitfiniex or whatever exchange you chose to buy BTC at that moment.

Another choice is you can choose to hold them in DAI ( a stablecoin actually pegged to US dollar by collateralizing ETH via smart contracts), unfortunately, it is not available in Bitfinex but available in Coinbase and Binance.US exchanges.

[Upgrade00]

There are a number of "decentralized' stable coins or a least they claim to be. I'll not touch any of the stable coins with a long stick, but you can do your research and pick if any fits your description.

On the other hand, although it is not advised, USD on major exchanges is "sort of" guaranteed by them, I guess... So isn't that actually kinda safer in the end?

If you're going to hold USD why not hold it in the bank rather than on an exchange? Except you're planning to be selling and trading regularly, there's no upside to keeping them on an exchange and trusting their reserve claim.
You also have the option to keep it in some other secure, hedge fund investment like gold.

[Black_Sun]

Based on your logic keeping it in the form of USD is better than any stable coin but I would definitely not recommend you to hold them on your exchange cause you know exchanges can be hacked at any moment even the greatest ones are not any exception to the hacks so why not just move the fiat back to your account and when you feel that you are at the bottom of the Bitcoin price then move back the USDT to Bitfiniex or whatever exchange you chose to buy BTC at that moment.

Another choice is you can choose to hold them in DAI ( a stablecoin actually pegged to US dollar by collateralizing ETH via smart contracts), unfortunately, it is not available in Bitfinex but available in Coinbase and Binance.US exchanges.

THe problem with withdrawing to a bank account is that I live in a country were there is 25% taxes on cryptos. This is absolute nonsense, since that money I ivested in crypto come from the time were I lived in other different countries, and I pay taxes on my normal job, but it is what it is and I cannot lose 25% everytime I want to keep my money safe.

You mean that DAI is actually decentralized? And I can have it on my cold wallet?
But then, if it is actually really decentralized, what's the point of holding USDT at all? WHy do people do this?

[dzungmobile]

In the long term, what do you think is the safest? To keep USD on exchanges or to keep USDT, USDC... on my cold wallet?

They are centralized stable coins with smart contracts that help companies to freeze your address and stablecoin in that address.

PSA: Most Stablecoins Can Be Frozen, Even in Your Own Wallets
Stable coin and black list

Use decentralized one like DAI.

The general wisdom is to keep your crptos on a cold wallets and that's what I do, HOWEVER USDT, USDC, etc. are not decentralized networks, they are companies.

What the hell is going on in your mind  

Stable coins are cryptocurrency, they are not network, not companies, you actually confuse many terms here.

[YOSHIE]

In the long term, what do you think is the safest? To keep USD on exchanges or to keep USDT, USDC... on my cold wallet?

I have known crypto for more or less 7 years and USDT, USDC and USD, I have done it and it occurred to me to store stablecoins that are pegged or valued with dollars/fiat in the long term, I often use USDT only as a transaction method, not for long-term storage.

As far as I know, saving in USDT doesn't add any value, even if it does, it's very little because it's based on dollars, so you should just save it in a bank or gold, I think it's safer and more profitable for you.

However, if you are considering saving in a wallet/exchange, try an investment method, so you can look at crypto types such as Bitcoin for the long term, maybe that's better for you in the future, who knows with the value you have in Bitcoin in the next five years Bitcoin could break to the $1 million level, maybe.

[Upgrade00]

Stable coins are cryptocurrency, they are not network, not companies, you actually confuse many terms here.

I think what he's trying to say is they are centralized cooporarions that handle their Network as they please, so you don't own the funds. They own it and you're hoping they let you access it.

In a way they are companies with their centralized network.

[Black_Sun]

Thank you for your answers.

After some reading (here amongst others) and thinking, I decided that in the coming months I will sell my shitcoins profits into:
 - 50% bitcoin on my cold wallet
 - 50% USDC (on ETH) on cold wallet too

Obviously, not a financial advice, just some personal estimation of a diversified relativelay stable and safe portfolio to prepare for a bear market.


BTW, after some digging and a few adjustements of the questions, here is what ChatGPT4 estimated:

Probability of a Major Issue Leading to Loss of Funds happening within the next year (OP)

Comparative Summary
USDT (Tether): 5-10% chance of systemic issues leading to loss of funds, primarily due to regulatory and transparency risks.
DAI (MakerDAO): 5-12% chance of systemic issues, driven by smart contract vulnerabilities and collateral volatility.
USDC (USD Coin): 2-5% chance of systemic issues, mainly related to regulatory actions and centralized control.
Bitcoin (BTC): 1-3% chance of systemic issues, with primary risks being 51% attacks and critical bugs.
Ethereum (ETH): 2-5% chance of systemic issues, due to smart contract vulnerabilities and protocol changes.
Euros at OP Financial Group (my bank in Finland): 0.5-1% chance of systemic issues leading to loss of funds.

THere was more details on each but this is the summary, and I find it quite interesting.

Unfortunately, withdrawing money from crypto to my Finnish bank would also mean loosing 30% in taxes, so not really an option.

Thanks everyone!
FX

[sokani]

You mean that DAI is actually decentralized? And I can have it on my cold wallet?
But then, if it is actually really decentralized, what's the point of holding USDT at all? WHy do people do this?

Some ignoramus would argue that keeping coins on exchange is safer than cold storage and so would such categories of persons argue that hoarding USDT is safer than DAI. Why USDT is the most popular stablecoin is because is offers much stability when compared to others, that's it the rate at which it depegs its lesser. Aside that, it's centralized and anything can happen.

[un_rank]

BTW, after some digging and a few adjustements of the questions, here is what ChatGPT4 estimated:

Do not take financial advice from ChatGPT or any AI tool. What these tools do is sum up popular answers from different sources and mash that into one answer. The popular answer is usually the wrong answer when it comes to financial situations.

- Jay -

[Black_Sun]

BTW, after some digging and a few adjustements of the questions, here is what ChatGPT4 estimated:

Do not take financial advice from ChatGPT or any AI tool. What these tools do is sum up popular answers from different sources and mash that into one answer. The popular answer is usually the wrong answer when it comes to financial situations.

- Jay -

I agree with that.
Which is why I guided the analysis towards estimating the "Probability of a Major Issue Leading to Loss of Funds happening within the next year".
It is not perfect, but it is still more tangible than just asking to advise me what to hold.
I have other personal parameters for my choice, but I think its estimations are sensible.

FX

[Black_Sun]

You mean that DAI is actually decentralized? And I can have it on my cold wallet?
But then, if it is actually really decentralized, what's the point of holding USDT at all? WHy do people do this?

Some ignoramus would argue that keeping coins on exchange is safer than cold storage and so would such categories of persons argue that hoarding USDT is safer than DAI. Why USDT is the most popular stablecoin is because is offers much stability when compared to others, that's it the rate at which it depegs its lesser. Aside that, it's centralized and anything can happen.

Agreeded.

[un_rank]

...

That is ll well. I should have actually said not to take financial advice from anyone at all and always do your own research with information provided. You say you have other parameters, so I can only say proceed cautiously.

Edit- Do not write a post right under your previous reply. It is possible to quote more than one people into a single post. While typing a reply scroll down to the previous replies and you will see a button to insert quote. Click on that and that text is added to what you are typing.

- Jay -