Why do people store their cryptocurrency on exchanges?

[MiliMil]

I am in the process of purchasing a Ledger Nano offline wallet and it got me thinking about why people store their digital assets on crypto exchanges.

These exchanges are susceptible to hacking, insolvency/bankruptcy, misuse of customer funds (FTX) etc.

What would happen if Binance got hacked tomorrow and lost the majority of its cryptocurrency? Would they be able to reimburse customers or would they become insolvent?

I asked my close group of friends how many store their assets on exchanges and only 1 out of 6 uses an offline wallet.

The recent incident with Luke Dashjr confirms that you are always at risk of being hacked no matter how vigilant you are.

Will give my thoughts on the Ledger Nano once I receive it.

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[pooya87]

why people store their digital assets on crypto exchanges.

It depends.
Some newbies who never bothered educating themselves about cryptocurrencies and bitcoin do it because they think that is the way to store them! For a very long time I saw people who thought blockchain.info is like PayPal and is the "owner" or "creator" of bitcoin so you have to only use that site if you wanted to use bitcoin!!!
Others who are short term traders do it because they know that altcoins pump and dump nature requires them very quick access to their shitcoins so that they can dump them in an instant instead of having to make a deposit and in some cases having to wait for thousands of confirmation before their account is funded and they are allowed to dump them.

What would happen if Binance got hacked tomorrow and lost the majority of its cryptocurrency? Would they be able to reimburse customers or would they become insolvent?

It depends on what happens to Binance after the hack. If people all go away, specially if after the hack another "good CEX" comes along and takes all their customers away, they could go under and won't be able to pay their users.
After all that is what Binance did to the previous exchange that got hacked when they took all their customers away and pushed them under.

[Apocollapse]

The recent incident with Luke Dashjr confirms that you are always at risk of being hacked no matter how vigilant you are.

If you think you're 100% safe after you hold your coins on hardware wallet, you're wrong. This because you're need to use an online software to integrate with your hardware wallet, this mean if your computer already get infected by virus and you're not aware with that, your hardware wallet could be compromised especially if you write the private key or seed phrase on your computer.

Hardware wallet isn't a perfect storage to combat any virus, but it's 99% way better than holding in exchange or online wallet.

[uneng]

People store their coins in exchanges because they pay interest over customers' funds. Between storing crypto in offline wallets and earning no passive income and storing online and earning passive income, some people prefer to choose the second option. However, due to the presented issues crypto investors are facing nowadays with exchanges services, it's really not a good idea to keep money in the exchanges. The risks are too high and there are no protection from authorities to customers, in bankruptcy or scam hypothesis. If at least authorities guaranteed protection to investors, it wouldn't be too risky to let funds at online platforms.

[elevates]

I am in the process of purchasing a Ledger Nano offline wallet and it got me thinking about why people store their digital assets on crypto exchanges.

What made you think that Ledger Nano is safe? There have been tons of incidents wherein it has got hacked. Ledger has never accepted that it has got hacked and has always blamed users. The only way you can safeguard your crypto is by keeping a little bit of what you have everywhere. That will help you a lot as you will not lose everything you have in one go.

[MiliMil]

What made you think that Ledger Nano is safe? There have been tons of incidents wherein it has got hacked. Ledger has never accepted that it has got hacked and has always blamed users. The only way you can safeguard your crypto is by keeping a little bit of what you have everywhere. That will help you a lot as you will not lose everything you have in one go.

I will be purchasing around 3 BTC in the next few days. I plan to keep it all in my hard wallet.
I have zero chance of getting hacked since my wallet isn't connected to the internet and is completely offline.

[Asiska02]

I am in the process of purchasing a Ledger Nano offline wallet and it got me thinking about why people store their digital assets on crypto exchanges.

The majority of people who fall victim to this scenario are those who were too lazy to ask how to save their coins in storage wallets. Some simply enter the world of bitcoin because it is trending and they want to profit from it without taking the time to sit and learn the do's and don'ts of the entire process.

These exchanges are susceptible to hacking, insolvency/bankruptcy, misuse of customer funds (FTX) etc.

What would happen if Binance got hacked tomorrow and lost the majority of its cryptocurrency? Would they be able to reimburse customers or would they become insolvent?

You'll also believe me when I say that a large number of people are aware of the risks associated with storing funds in exchanges and knows they’re susceptible to hacking and total lost of funds but continue to do so. You can't blame them because the majority of them have a reason. However, even if it is necessary to keep some of your coin in those exchanges, it is always advisable to keep a small portion of it there.

[Pandji02]

I think those who do that just don't think about it too much. Most likely they don't think about the stuff in their life too much and just flow in the river of life, but that's just my assumption, I'm used to thinking about everything I do.

[rodskee]

I am in the process of purchasing a Ledger Nano offline wallet and it got me thinking about why people store their digital assets on crypto exchanges.

I'm not sure if there are many of us still use exchange to store our funds because it has been long ago that this is being tackled that there are no safer place about our money in exchange as they are prone to hacking or even inside job money taking.

try not to fool ourself from this and better to use offline wallets like what you are going to purchase , ledger Nano .

[Queentoshi]

There are various reasons why people still store their cryptocurrency on exchanges even with the many warnings that have been given, and I am not just making reference to newbies but also some old crypto users, maybe on this forum or not. But one reason I have noticed is Procrastination. Procrastination in the sense that they have heard about the warning about not keeping your cryptocurrency on exchanges, they have planned to install or buy a wallet, and move their cryptocurrency away from the exchange they are using, they make all this plans, but they never do it because they keep procrastinating.

[Jatiluhung]

the reasons everyone still keeps their crypto assets on exchanges will vary widely.
and these reasons certainly have a diverse rationale. like some because they are really beginners and don't even know about the risks they take when they leave their assets on the exchange.
and of course there are those who only keep part of their assets on the Exchange. the reason is because they trade it every day (a day trader). and there are also reasons because they only have small assets so they don't have to bother transferring them to their personal wallet.

and i think a beginner who come with a lot of money (rich) and he will start to invest in crypto and bitcoin. and he will invest heavily. so I think the beginner will definitely first explore a safe way to store his investment assets.
there's no way he's going to deposit a lot of money and buy a lot of bitcoins on the exchange and leave it be. I think for now even beginners already know where they have to store their assets to be safe. but most of them still keep some of their crypto assets on the exchange because they really continue to trade them or indeed the amount is really, really small.

[Golfler]

Is the hardware wallet also likely to be stolen, damaged, or infected with a virus? I think it is better to store it separately and store it in multiple wallets.

[m2017]

It seems to me that it is easier for people to store their crypto on exchanges, because it is easier. I'll explain now. They are accustomed to using banks and depositing their money, and they shift all security and safety concerns to the bank. So users will relieve themselves of responsibility, which is fraught with huge risks. Storage on cold wallets requires some knowledge (which is quite affordable) and actions (which are also doable), but beginners don't want to delve into it out of laziness or irresponsibility.

So you have decided to seriously approach the storage of your crypto and buy a hardware wallet. That's the right decision. So you will be calm about your funds and reduce the risk of losses, as if you were storing it on the stock exchange. Commendable.

[LogitechMouse]

Why do people store their cryptocurrency on exchanges?

People have different reasons as to why they are preferring to store their cryptos on exchanges.

The only reason that I know is so that they can just sell their cryptos on the exchanges as early as possible if in case something good happens that might cause the coin that they are holding to pump immediately. I mean transferring coins from one address to another address takes time and that "time" might affect the amount of profits that they might have thus, they choose to risk it all and let it store on the exchange.

Maybe another reason why they are storing it on exchanges is the fact that they can earn a small percentage of that coin annually. Binance have this "Earn" feature where holders can earn a certain percentage annually.

What would happen if Binance got hacked tomorrow and lost the majority of its cryptocurrency? Would they be able to reimburse customers or would they become insolvent?

We don't know. Cryptocurrency isn't regulated so its CZ who will decide whether he will reimburse his customers if the worst thing happens or not.
Centralized exchanges are very prone to hacks and with what happened to FTX, for sure the trust of investors towards CEX declined. On the other hand, I believe that Binance will not get hack or at least lose their funds or run away (at least not in the next 3 years ).

[bittraffic]

So much trust in CEX. Binance was once hacked and they refunded the affected users.
Majority I suppose are traders that's why coins are on exchanges. It's easy to buy and sell when it's all there in the exchange while that market fluctuates, you wouldn't go to go deposit and withdraw every time the market shifts. I do this but for a few coins only, Binance has a mobile app, easy to access. If you are to keep your coins for a long term, a hardware wallet would be fine.

[boldandbrave]

Depending on each person, maybe they will only hold it for a short time or maybe they haven't found the right offline wallet. Btw, I had a bad experience when using ledger wallet. About 3 years ago I bought it to store some coins and hold it for a long time. so I didn't access the wallet for over a year. And when i wanted to transfer my coins i found that my ledger wallet LCD screen was showing nothing only a blue screen which required me to buy a replacement screen.

[Nrcewker]

I am in the process of purchasing a Ledger Nano offline wallet and it got me thinking about why people store their digital assets on crypto exchanges.

The reason for which people store their digital assets on crypto exchange is that they need it to trade and make money. Out of 90% people store their cryptos for this purpose only. Rest 10% if they storing their funds, they do it because either their funds are very less or they aren’t able to afford these wallets like Ledger etc. I know there are many risks when you store your coins on exchanges, but to be honest for most of the people these are only the options as they don’t know how to use electreum or they aren’t able to afford ledger.

[xSkylarx]

There are several reasons for this, including the fact that they are still using it to purchase another coin or that they are waiting for a good price to sell it and then convert it to their own fiat currency. This is the main reason I keep my cryptocurrency on exchanges: I need to wait for the right time to sell it, then transfer it to my own wallet. I'm not sure how long others keep it, but if something happens in exchange, they'll lose their coins as well. 

[Rikafip]

I am in the process of purchasing a Ledger Nano offline wallet and it got me thinking about why people store their digital assets on crypto exchanges.

Some to get measly return via staking, some simply due ignorance, thinking that exchanges are sort of banks and that they funds are "safu", some are simply too afraid to hold their own coins and would rather put that responsibility in someone else's hands. Neither of these reasons make any sense, but that's people.



 

What would happen if Binance got hacked tomorrow and lost the majority of its cryptocurrency? Would they be able to reimburse customers or would they become insolvent?

Since their "safu" fund is allegedly 1 billion and Binance is in control of tens of billions of dollars, you can imagine what would happen and whether they would be able to reimburse everyone.

I asked my close group of friends how many store their assets on exchanges and only 1 out of 6 uses an offline wallet.

In the early days bitcoin attracted mostly people who were heavily into privacy, freedom, believed in "be your own bank" thing, but majority of bitcoiners nowadays don't really care about any of those things exepct numbers going up, so this example of yours doesn't surprise me one bit.

They store because they want higher exchange rates in future.

And how exactly you get "higher exchange rates" by storing your crypto on the exchange? Exchanges are for trading (exchanging) currencies, not for storing.

[Ayers]

So much trust in CEX. Binance was once hacked and they refunded the affected users.
Majority I suppose are traders that's why coins are on exchanges. It's easy to buy and sell when it's all there in the exchange while that market fluctuates, you wouldn't go to go deposit and withdraw every time the market shifts. I do this but for a few coins only, Binance has a mobile app, easy to access. If you are to keep your coins for a long term, a hardware wallet would be fine.

The same point of view, those who still store their coins on exchanges so far are probably traders, and traders make up the majority of this market rather than holders. For a trader, other than centralized exchanges, they have almost no other choice, it is considered a must whether they like it or not.

OP, storing assets on cold wallets or non-custodial wallets can only be considered much more secure than exchanges, but by no means absolutely secure. Therefore, you should not be subjective and negligent in preserving your cold wallet.