Are cold wallets safer than online exchanges?

[Z-tight]

but it depends on the trust you give to the exchange or how reputable it is, like Binance, Bitget, and Bybit. In short, do it at your own risk.

Take note that you should not trust any exchange or custodial service with your funds, no matter how reputable you believe the exchange is. Recent events have shown that any centralized exchange can collapse and even if they don't, they could still confiscate your funds for any reason at all. Store your funds only in your self custody, back up your seed phrase in a safe location and add extra layers of security.

[tread93]

Yes, cold wallets are much more safer than storing them in exchanges, if you can imagine what I'm describing to you then you'd understand, picture cold wallets as something like safe in your house, you can store anything in that safe and only a handful can open it without forcing the safe to get to the inside and exchange wallets are like those informal lending that's organized by a group of your acquaintance in your work, they may say that it's safe but there's really nothing that's stopping them from running away with the money or risk the money being stolen because of a thief. So based on how I've described it, it basically means that your cold wallets might be the best thing for storing your bitcoins, just don't forget about how to access them or you'd end up like that dude that's suing the landfill because he can't find the laptop that contains a lot of bitcoin but I digress.

Always remember these saying: "Not your keys, not your coins."

Oh man, that landfill story is such a nightmare. How unfortunate for that guy. Always remember that an exchange is the absolute WORST place to leave your coins. Completely susceptible to getting hacked, either the exchange or yourself. With a cold storage wallet that is entirely offline there is no chance of getting hacked if you have it airgapped and take all the correct precautions. IF you're going to keep your coins on the exchanges then you're either converting your coins and getting them right off or you're trying to cash out or you're trading. Even if you're trading I would still convert whatever you need into whatever currency you want and them still take the extra step and send the funds back to your cold storage wallet for safekeeping until you're ready to swap them back into BTC or whatever or cash out.

[Darker45]

I'd prefer to keep it in a cold storage. There's no debate about it. A cryptocurrency exchange is an exchange, a platform for those who are trading. So, if you aren't trading, you have no reason to keep your funds there.

The catch, however, is that a cold storage is only as safe as you make it. You are the sole owner, controller, and keeper. Such responsibility isn't light. One false move and it could cost you everything. So, it can't be overemphasized how important it is to know and understand the dos and don'ts of safekeeping your own coins. It's a must. It's even a prerequisite to owning Bitcoin.

[Pandu Geddon]

but it depends on the trust you give to the exchange or how reputable it is, like Binance, Bitget, and Bybit. In short, do it at your own risk.

Take note that you should not trust any exchange or custodial service with your funds, no matter how reputable you believe the exchange is. Recent events have shown that any centralized exchange can collapse and even if they don't, they could still confiscate your funds for any reason at all. Store your funds only in your self custody, back up your seed phrase in a safe location and add extra layers of security.

because in principle the exchange is actually a place to convert or trade, not to store our assets. although I'm sure there are still those who do it (storing assets on the exchange), they definitely have their own reasons and they accept the risk.
Those who do this are not unaware of the risks or have not read history. they have that knowledge, but perhaps out of necessity, they still take that risk.

To minimize risk, it is better not to leave assets on the Exchange in large amounts or for long periods of time. if there is nothing you want to do with the assets on the exchange, such as make a trade. It is recommended to make a withdrawal immediately.
I know the main reason they don't make withdrawals every time is trading or fees that may be charged every time they want to make a transaction on the exchange.

[hd49728]

A cryptocurrency exchange is an exchange, a platform for those who are trading. So, if you aren't trading, you have no reason to keep your funds there.

Trading is risky so always do trading with small capital, not all capital we have.
Storing money on centralized exchanges is risky too, so always store small capital on centralized exchanges.

Combine them together, the common recommendation is always store small capital we have on centralized exchanges for trading.

because in principle the exchange is actually a place to convert or trade, not to store our assets. although I'm sure there are still those who do it (storing assets on the exchange), they definitely have their own reasons and they accept the risk.
Those who do this are not unaware of the risks or have not read history. they have that knowledge, but perhaps out of necessity, they still take that risk.

Two biggest barriers for safe practice. The first basic barrier is don't know about risk and the second barrier is knowing about risk and what is recommended safe practice but lack of determination to do such practice. Because they don't understand severity of risk and want to ignore risk to get convenience in practice.

To minimize risk, it is better not to leave assets on the Exchange in large amounts or for long periods of time.

People can use exchange account, wallet on exchange like their hot wallet and must have small money in hot wallet.

With hot wallet on exchanges, they can trade and with small capital in it, they will have smaller loss than if they store all money in hot wallet on centralized exchanges. Many risks at the same time, loss in trading and loss of capital by exchange problems.

[Yamifoud]

Online wallets are prone to hacking and much more with exchange wallets which is why it is highly advisable to use a Cold wallet as a storage wallet for the sake of security. Of course, we can't guarantee 100% safety assurance but at least, the chances are very slim compared to online wallets. Still, it is the way of keeping them safe matters a lot because if we are too careless, that makes no sense at all.
Aside from that - we never store all our funds in a single wallet for additional protection for not losing it all in case hacking become successful.

[GbitG]

I know the main reason they don't make withdrawals every time is trading or fees that may be charged every time they want to make a transaction on the exchange.

Some people might not withdraw their assets from exchanges because of the fees but that shouldn't be a problem if the person isn't using those funds daily. If you have extra funds in your exchange wallet, and you are not using them for trading or staking purposes, then it is better to simply withdraw them and keep them in a non-custodial wallet.

A few months ago, I heard or read somewhere over the internet that some institutional investors keep their funds in the exchange where they buy them, I think the reason was that they believe exchanges are safer than wallets but that isn't true in all cases because exchanges have higher odds of getting attacked by hackers so there can be negative consequences of doing that.

[abel1337]

I know the main reason they don't make withdrawals every time is trading or fees that may be charged every time they want to make a transaction on the exchange.

Some people might not withdraw their assets from exchanges because of the fees but that shouldn't be a problem if the person isn't using those funds daily. If you have extra funds in your exchange wallet, and you are not using them for trading or staking purposes, then it is better to simply withdraw them and keep them in a non-custodial wallet.

A few months ago, I heard or read somewhere over the internet that some institutional investors keep their funds in the exchange where they buy them, I think the reason was that they believe exchanges are safer than wallets but that isn't true in all cases because exchanges have higher odds of getting attacked by hackers so there can be negative consequences of doing that.

I think institutional investors don't store their funds on an exchange wallet for a long period of time, it is a foolish move honestly and I think they know that exchanges are prone to hacking compared to cold wallet. There are many times already that funds from exchanges had disappeared, hacked or misused by the exchange, there's no way that big institution will hold their money on something that is not safe unless they can earn or get some benefit from storing it there.

[$mart7]

Keeping your coins in an exchange is not a good idea. Keep them in a cold wallet for security reasons

[uneng]

If you had a large amount of cryptocurrency would you prefer to keep it on an offline cold wallet or an online cryptocurrency exchange?

Both have pros and cons.

The biggest cons of having your funds inside a cold wallet, in my opinion, is the fact you aren't going to make any passive income from it. Meanwhile, at exchanges and similars, it's possible to make some extra income besides Bitcoin's positive fluctuations in price, through the interest these services pay to you for the coins under their custody.

On the other hand, the cons of having your coins at third party platforms is the lack of guarantees and safety over your money. Although they pay an interest rate over your coins, you are under constant risk of being scammed and having your coins stolen by hackers or by the platforms' operators themselves.

In the end, it's better to just stick your money to a cold wallet, as it's safer, and even though you aren't making interest from it, you are assured your money isn't going to disappear due to you being hacked or scammed.

[dezoel]

Despite the pros and cons, one needs to understand that an exchange is not a wallet and you are not supposed to use it as one. An exchange provides trading and related financial services to its customers, and only the funds that are being used for these services and activities should stay on the exchange any extra funds shouldn't be kept there just because it can keep the funds doesn't mean it should be used as a wallet.

The answer to this question is obvious, of course, I would use a cold wallet to store my cryptocurrencies that I aim to hold for the long term and have no plan on selling in the near future, if I plan to sell them then I will keep them in the exchange and sell them whenever I want to and then buy again with the funds, that means I will be trading and that's a different scenario.

[Smack That Ace]

If you had a large amount of cryptocurrency would you prefer to keep it on an offline cold wallet or an online cryptocurrency exchange?

Both have pros and cons.

The biggest cons of having your funds inside a cold wallet, in my opinion, is the fact you aren't going to make any passive income from it. Meanwhile, at exchanges and similars, it's possible to make some extra income besides Bitcoin's positive fluctuations in price, through the interest these services pay to you for the coins under their custody.

On the other hand, the cons of having your coins at third party platforms is the lack of guarantees and safety over your money. Although they pay an interest rate over your coins, you are under constant risk of being scammed and having your coins stolen by hackers or by the platforms' operators themselves.

In the end, it's better to just stick your money to a cold wallet, as it's safer, and even though you aren't making interest from it, you are assured your money isn't going to disappear due to you being hacked or scammed.

Of course, both have their pros and cons, but we need to evaluate whether the benefits we get from storing bitcoin on centralized exchanges are worth the trade-off. I mean, with services like staking, lending...as you mentioned, and how much percentage will we get from that each month? 1% or 2% per month and is that worth the trade-off because we risk losing 100% of our assets? Meanwhile, storing bitcoins in a cold wallet will not generate passive income but in the long run can generate 100% or 1000% profit and your assets are also safer. Which do you think would be a better choice?

[AprilioMP]

A few months ago, I heard or read somewhere over the internet that some institutional investors keep their funds in the exchange where they buy them, I think the reason was that they believe exchanges are safer than wallets but that isn't true in all cases because exchanges have higher odds of getting attacked by hackers so there can be negative consequences of doing that.

Reasons that are not based at all. I think they have a certain time to maintain their funds in the exchange because they also realize the risks that will be received if they continue to maintain a sum of money in the exchange.
Only investors do not know anything ready to lose some money. Maybe they only see convenience such as no need to pay shipping costs if the money is left stored on the exchange.

No matter how great the stock exchange and no matter how big the trust of a stock exchange, it's still not a good choice to save money online because the exchanges and cold wallets are two things that have a very large difference in function.

[uneng]

Of course, both have their pros and cons, but we need to evaluate whether the benefits we get from storing bitcoin on centralized exchanges are worth the trade-off. I mean, with services like staking, lending...as you mentioned, and how much percentage will we get from that each month? 1% or 2% per month and is that worth the trade-off because we risk losing 100% of our assets? Meanwhile, storing bitcoins in a cold wallet will not generate passive income but in the long run can generate 100% or 1000% profit and your assets are also safer. Which do you think would be a better choice?

By lending your money to third party platforms you be making something between 4%-8% yearly, what gives an inferior monthly margin to 1%... Compared to the risks of losing 100% of your funds it definitely doesn't worth. It's better to keep your money safe in a cold wallet.

Since there are no guarantees when investing in such platforms, this comparison is the final proof we need to reach the accurate conclusion of which storage method should be adopted: hardware wallets.

Even the legalized businesses aren't safe to invest your funds, as we saw in 2022 the scandals involving Celsius and FTX. Regards Celsius, investors were able to recover about 33% of their funds, but it's still a big loss after all. The interest generated until the scam happened just doesn't cover the losses faced by investors.

When we choose letting our money deposited at such websites we are aware about the high risks involved, therefore we shouldn't deposit all our money there, neither amounts of money we can't afford to lose.

[coolcoinz]

The biggest cons of having your funds inside a cold wallet, in my opinion, is the fact you aren't going to make any passive income from it.

Not really. You can earn passive income by simply holding an asset that works as an inflation hedge.

Many people don't understand what making money is. Let's say you hold an expensive necklace. You can put it to work and make women pay for being able to wear it at events, but you'll be taking a risk.
You can also put it in a safe place and because fiat money is being created out of thin air, the necklace will grow in value anyway.

I hold my bitcoin offline and it's worth more with every halving.

[Ojima-ojo]

but it depends on the trust you give to the exchange or how reputable it is, like Binance, Bitget, and Bybit. In short, do it at your own risk.

Take note that you should not trust any exchange or custodial service with your funds, no matter how reputable you believe the exchange is. Recent events have shown that any centralized exchange can collapse and even if they don't, they could still confiscate your funds for any reason at all. Store your funds only in your self custody, back up your seed phrase in a safe location and add extra layers of security.

The thing is that, excahges are non custodial and at that, the security of funds are left in the hands of the exchanges, and at anytime the wallet onwer could lose control of the funds if the exchange feels like the operator may have violated they rules or excahge deciding to close it door on the face of the owner with all the funds in it, we have seen multiple cases of excahges becoming exit scam and with users not being able to ever recover their funds.


Much more also we have to know that when you store your bitcoin on a cold wallet, you have total control over the money and can use it at whatever time that the owner which to use such funds.


So there is a big difference between an exchange wallet and a cold wallet in terms of freedom and control of assets.

[Cookdata]

Some people might not withdraw their assets from exchanges because of the fees but that shouldn't be a problem if the person isn't using those funds daily. If you have extra funds in your exchange wallet, and you are not using them for trading or staking purposes, then it is better to simply withdraw them and keep them in a non-custodial wallet.

Will you prefer to lose the entire portfolio to exchange than to lose some cent-few dollars to some random group of people you know nothing about? I understand how some people think, they don't really understand how Bitcoin actually works under the hood, they just hear about it and want to hold it but know noting about how it operate, this is why scams looks easy to pass through them as they don't even know how to smell some dangers and what's is wrong from what is right.

A few months ago, I heard or read somewhere over the internet that some institutional investors keep their funds in the exchange where they buy them, I think the reason was that they believe exchanges are safer than wallets but that isn't true in all cases because exchanges have higher odds of getting attacked by hackers so there can be negative consequences of doing that.

Only a lazy person that is used to how the banking system works will believe an exchange is a safe haven to keep coins, some people don't even know that doing this is selling privacy plus security. Only if it's mandatory for people to learn how Bitcoin works before they are allowed to buy them but the marketing push of centralized exchanges precede any knowledge been push for new people that are new to crypto.

[Mame89]

I know the main reason they don't make withdrawals every time is trading or fees that may be charged every time they want to make a transaction on the exchange.

Some people might not withdraw their assets from exchanges because of the fees but that shouldn't be a problem if the person isn't using those funds daily. If you have extra funds in your exchange wallet, and you are not using them for trading or staking purposes, then it is better to simply withdraw them and keep them in a non-custodial wallet.

A few months ago, I heard or read somewhere over the internet that some institutional investors keep their funds in the exchange where they buy them, I think the reason was that they believe exchanges are safer than wallets but that isn't true in all cases because exchanges have higher odds of getting attacked by hackers so there can be negative consequences of doing that.

I think institutional investors don't store their funds on an exchange wallet for a long period of time, it is a foolish move honestly and I think they know that exchanges are prone to hacking compared to cold wallet. There are many times already that funds from exchanges had disappeared, hacked or misused by the exchange, there's no way that big institution will hold their money on something that is not safe unless they can earn or get some benefit from storing it there.

If we look at the cases that have occurred on several exchanges and perhaps the latest one that still sticks in our minds is the FTX exchange, we should be able to understand that storing assets on an exchange is a careless act even though the exchange has a big name but it does not rule out the possibility that could go bankrupt at any time. .

So saving in a non-custodial wallet is the best option, especially for large amounts. While I sometimes use a DCA strategy on exchanges, once every month or two I transfer to a non-custodial wallet.

In essence, no matter how many assets we have, don't get into the habit of storing assets on the stock exchange, we have to get used to prioritizing non-custodial wallets because we have control over ourselves or in other words we have our own bank so that the assets we own remain safe.

[Silberman]

If you had a large amount of cryptocurrency would you prefer to keep it on an offline cold wallet or an online cryptocurrency exchange?

Both have pros and cons.

I'm interested to hear the thoughts of others.

But the pros and cons do not hold the same weight, storing a large amount of bitcoin requires that you do so on the safest way possible, so storing your coins offline will always be better than the alternative, now keeping a small amount at an exchange is reasonable as you never know when you may want to exchange those coins for another currency, gamble or buy something you may want, but it is unreasonable to keep all your coins at an exchange for that reason alone.

[Nothingtodo]

If you had a large amount of cryptocurrency would you prefer to keep it on an offline cold wallet or an online cryptocurrency exchange?
Both have pros and cons.
I'm interested to hear the thoughts of others.

It doesn't matter if cryptocurrency is low or high I will always consider cold wallets more secure than exchange wallets.  Because exchange wallet wallet authorities can access your Cryptos at any time but if you hold your assets in your own hardware wallet then no one can access your assets except you.