How do you separate your everyday Bitcoin setup from long-term storage?

[Cookdata]

It is preferable to be able to simply put what you want to spend in an exchange so that you don't have to spend what you intend to hold already.

Is "spending" here limited to swapping to fiat? If I'm buying VPN subscription with Bitcoin it doesn't seem to offer any benefit. Regardless of that though, saying that we should leave some coins on exchange to save fees seems a bit careless. It isn't that difficult to separate your coins into multiple wallets or devices if you wanted to. Fees only takes a fraction of your transaction. Unless you're a day trader where you can move lots of funds each day (which assume the majority isn't).

There is no single benefit of using an exchange to keep Bitcoin, you will likely spend much on fees if you use an exchange to send Bitcoin to external address than when you use custodial wallet to send. A simple segwit transaction with 1 input and 1 output with 1 sats will cost few penny cent but if you use an exchange, you are going to spend $1-$3 flat fee for Bitcoin transaction, where is the benefit of exchange of not for fiat and I don't think OP is looking for exchange in the first place.

The only reason why I think anyone will choose an exchange for hodl and everyday spending over custody is volatility, and most likely they don't like to hold Bitcoin because of volatility, they use stable coins, swap between fiat and sell to other vendors on p2p, that's the only reasonable options unless the person is a full time trader which is understandable.

[Filicius]

What is your regular use OP that makes you leave some coins in a hot wallet? I really want to know this because many people got it wrong, if you aren't buying and selling every day it makes no sense to leave some coins in your hot wallet.

There is absolutely nothing wrong in leaving a small amount of bitcoin in a hot wallet. Doesn't matter if you're not going to spend it in the next few weeks, as long as it is a small amount you can afford to lose, then that is okay.

I agree with you, Coyster. In my case, I hold a small amount in my smartphone, in different wallets (Apps) between LN and normal ones, for convenience when making small transactions. I am well aware that any day some misfortune could happen, although the loss or theft of the device would no longer be a concern because I keep the keys. Anyway, as you said, I have just enough not to lose sleep in case I lose that amount.

[L E G E N D A R Y]

It's preferable to go with what the OP suggested about having our daily expense funds in the hot wallet, instead of leaving it in a centralized exchange as you recommending, all for the reason of avoid transactions fees and what appears to be stress for some people having to transfer funds from their open source hot wallet to exchange for immediate use.  For me I rather pay the transaction fee which isn't any significant compared to the possible risk of leaving it in an exchange.

I believe one thing that actually gets people into trouble is focusing too much on the convenience of avoiding to pay a small fee, because this literally sometimes make them pay less attention to the the security trade offs, which is basically meant to be the most important thing. Only keeping the amount that’s you need for your regular spending on a hot wallet actually gives you more control over your funds. I sure wouldn’t mind paying some small fees just to guarantee my peace of mind and greater control, especially when the only alternative left with me is having ti entrust my funds to a third party, because that isn’t a risk I’m willing to take.

[CryptopreneurBrainboss]

In my case, I hold a small amount in my smartphone, in different wallets (Apps) between LN and normal ones, for convenience when making small transactions. I am well aware that any day some misfortune could happen, although the loss or theft of the device would no longer be a concern because I keep the keys. Anyway, as you said, I have just enough not to lose sleep in case I lose that amount.

You got everything covered but some people still combine their investments with their spending wallets and that's already a disaster waiting to happen as one mistake happens and everything is lost. I even see some still making the mistakes of having their seed phrase kept on their mobile devices (most people will deny this but that's just the reality) while others make use of custodial wallets, having no seed phrase to back up and they claim it's easier that way as they can spend Bitcoin easily or access it. Best precautions are taken now and everyone is encouraged to be using non custodial wallets for either hodling or spending Bitcoin.