Self-custody is truly necessary for everyone.

[hd49728]

True, but neither are funds stored in centralized exchanges insured. The exchange can make a mistake that would cost their customers and they end up getting nothing. If people actually want their funds insured up to a certain amount, then they should keep them in fiat and store it in the bank. To be honest, i would rather leave my funds in fiat and keep it in the bank, than buy crypto and store it in an exchange.

People as customers make their mistakes by funding their accounts on centralized exchanges and consider their accounts as wallets for long term storage. Whatever they believe in and do after that are all wrong if they put the safety of their funds on exchange responsibility.

Exchanges can make their mistakes in security or customer fund management but firstly if their exchanges hacked, they suffered big losses, then customers will be next ones. Customers will only have big advantages in such situations as if an exchange is bankrupted, most users will lose all or most of money. At such time, it does not make any sense to blame responsibility on any entity, customers can not resolve anything and have to rely on that exchange as well as government while chance of getting money back is very small.

[CryptoBuds]

Risk from centralized exchanges is their inappropriate use of customer money deposited on their exchanges and the collapse of FTX exchange is a classic example in cryptocurrency market and centralized exchange industry. It's used to be a tier 1 exchange but several days after a post from Changpeng Zao, FTX collapsed with its death spiral, and the fact revealed shows us that FTX exchange used customer money very inappropriately and dangerously.

I don't support keeping Btc on centralized platform. But using FTX as an example is no longer really relevant to the current market.

The framework is also being developed, and once it is fully implemented, incident like these should become much less likely.
Not to mention, ETFs are much safer because they're more strictly regulated and supervised. ETF custody model has been around since 2003 and has been tested for more than 20 year.

As some have pointed out, selfcustody and custody both have their pros and cons. The key is choosing what fits your risk tolerance and knowledge, rather than assuming there's only one safe option.

[cxtreenal]

Is it better to leave our money in a large regulated institution, where there are rules and, if there is a problem, you can go to court?

If there is a local financial institution that is regulated by the government, you can deposit your asset there. Do not exceed the limit because the value of the accumulation cash may decrease due to inflation, so it is better not to go beyond the amount that is convenient for you. Smart people invest excess funds rather than accumulation cash.

And for someone who has a large amount of Bitcoin, does it really make sense to put everything in self-custody?

Maybe it is better to diversify not only between different forms of custody, but also between Bitcoin, traditional investments and regulated institutions.

Holding Bitcoin and maintaining the security of this asset requires you to acquire technical knowledge. You can acquire this knowledge without much complexity.

Avoid investing the entire amount of funds that you have. Even if you keep Bitcoin in self-custody, it is better to use multiple wallets rather than using a single wallet. Do not keep your assets in one place.

[Razmirraz]

There is no 100% secure storage method, as every place for storing money carries its own specific risks. Regulated institutions can reduce the risk of human error but increase third-party risk. Self-custody, on the other hand, can reduce third-party risk but increases the risk of human error. In light of this, you should adopt a prudent approach, such as "Don't put everything in one place."

On the one hand, you can use regulated institutions for convenience, liquidity, and small amounts. On the other hand, use self-custody for large, long-term savings. If necessary, diversify a portion into traditional assets so that you are not entirely dependent on Bitcoin's volatility. Choose a method that aligns with your technical proficiency, age, and risk tolerance. The primary goal is not necessarily holding the keys yourself or relying on a third party, but rather ensuring your assets remain secure over the next 5 to 10 years.

[Faisal2202]

Older people, who have difficulties with technology, may have more problems with the wallet and security.

And for someone who has a large amount of Bitcoin, does it really make sense to put everything in self-custody?

Maybe it is better to diversify not only between different forms of custody, but also between Bitcoin, traditional investments and regulated institutions.

I agree Marcelo, old people don't even know how to use smartphones correctly but some of them are way too smart but mostly don't know what is the new technology, they just know it has made people less socialized, and more extroverted that they don't know when and what not to say.

And this is true as well.

But speaking of BTC safety, I would say you are right, we should not hold every coin in self custodial wallets and in exchanges I understand and know what kind of replies might be coming from readers of this post, that exchanges are not safe and TBH I also recommend people to not hold your coins on exchanges because anytime anything could happen and they can force you to withdraw while the withdrawals are restricted by them as well.

They play double game, they deceive you that's when you get frustrated with all the services of the same genre that's why diversification is a good option, hold few in exchanges and more in self custodial wallets but only for you, those who still think self custodial wallets are safe they will stay safe because they have this belief for a reason that the entropy of Coldcard wallet was low but there are others that have high entropy like Electrum etc.

[icebar]

There is a high possibility for huge losses if an investor does not have self-custody and this can be understood when someone faces big loss. Self-custody does not mean 100% safe, but when an investor keeps his assets with others, he has to keep an eye on others. I learned about an incident that was related to the Canadian crypto exchange QuadrigaCX in 2019. The owner of the exchange stored all the users' money in one of his wallets, and later when he died, his secret keys could not be found. Many investors did not get their money back. There are many cases where investors have faced huge losses later by not keeping assets in their own custody. In my opinion, if someone wants to invest all the assets of his life, he must keep them in self-custody, and diversifying the assets that will help reduce the level of risk.

[Die_empty]

People as customers make their mistakes by funding their accounts on centralized exchanges and consider their accounts as wallets for long term storage. Whatever they believe in and do after that are all wrong if they put the safety of their funds on exchange responsibility.

Exchanges can make their mistakes in security or customer fund management but firstly if their exchanges hacked, they suffered big losses, then customers will be next ones. Customers will only have big advantages in such situations as if an exchange is bankrupted, most users will lose all or most of money. At such time, it does not make any sense to blame responsibility on any entity, customers can not resolve anything and have to rely on that exchange as well as government while chance of getting money back is very small.

I am not in any way promoting centralised exchanges. But some of the exchanges that suffered from hacks or went bankrupt were able to repay users. Although it took so many years, MtGox users got back their money. Binance and others that have suffered challenges didn't allow it to affect users. Other centralised exchange users are unlucky and have not been able to recover their deposits, therefore keeping large funds in these exchanges is risky. Those who dont want to take responsibikty sholld be willing to suffer the consequences.

[MisFoxie]

One false move could mean your funds are gone. And your funds aren't insured while in self-custody.

True, but neither are funds stored in centralized exchanges insured. The exchange can make a mistake that would cost their customers and they end up getting nothing. If people actually want their funds insured up to a certain amount, then they should keep them in fiat and store it in the bank. To be honest, i would rather leave my funds in fiat and keep it in the bank, than buy crypto and store it in an exchange.

Banks are way better than centralized exchange because if a Bank get bankrupt they will at least give insurance moneym. well if a exchange hack or something like this happens they will give nothing to users. Instead of keeping money in a bank you should buy gold and keep it in the bank in that way you will not lose the value of your money.
I only see two currency that can store for long and those are Bitcoin and gold and others are just for daily uses.

[Dareo]

-snip-

The biggest advantage of self custody is that you have control but it's hard to say it's the safest in all situations. Because if you lose a backup or seed phrase, you don't have the option to call an organization and ask for a solution. It's a bit like the keys to your bike, If you leave your bike in someone else's garage, you have nothing to do but watch if it gets stolen but if you keep the keys and bike with you, you can at least be safe. If you can handle the seed phrase a little carefully, self custody is the most reliable way to sleep peacefully in the crypto world. Honestly it's not about who prefers which method but rather understanding the risks according to your own usage pattern. So if you take self custody, you are also responsible for properly managing backup and device security.

[Felicity_Tide]

Is it better to leave our money in a large regulated institution, where there are rules and, if there is a problem, you can go to court?

And this is where majority of our problem lie as humans. We've somehow gotten so relaxed that we strongly believe that the law has our backs at all times. Imagine you choosing a Centralised exchange, just because you think you can easily take them to court when anything happens to your money... Well, I guess you wouldn't be saying something like this if were one of the Mt. Gox victims who had to wait years for a refund.

Self-custody gives the user direct control over their Bitcoin, but it also puts all the responsibility on them.

~snip
Older people, who have difficulties with technology, may have more problems with the wallet and security.

And should that responsibility be a problem?... Are people not responsible for other things that concern their day to day activities?. Of course, I agree that some individuals are very good at overcomplicating things for themselves, but that doesn't make self custody a rocket science either... It's something people learn over time. And as for older people who are not too conversant with technology, they can practice whatever they want, but again, doesn't this same limitation also apply to use of Cex or is it not something worth talking about?. Regardless, I want to believe that majority of bitcoin users can actually practice self custody even though most people choose to shy away from it.

[AgriTrack]

Banks are way better than centralized exchange because if a Bank get bankrupt they will at least give insurance moneym. well if a exchange hack or something like this happens they will give nothing to users. Instead of keeping money in a bank you should buy gold and keep it in the bank in that way you will not lose the value of your money.
I only see two currency that can store for long and those are Bitcoin and gold and others are just for daily uses.

I don't know if you know this or not, but a bank's government-backed insurance company or agency only covers a limited amount of your total balance, which means that if it exceeds the insurance limit, you will still only get what was insured. For example, if the insurance agency has a insurance limit of $100k, and you had $200k in your account when the bank failed and had to shut down, you will only get $100k back from the insurance agency. This is only done if the bank has to be shut down, but if the bank is taken over by another bank that is ready to cover the deposits and everything, then your account will just be transferred to the new bank and they will cover everything. This is at least what I know based on what I've read about the subject.

About centralized exchanges, if an exchange files bankruptcy, that usually means that they aren't simply running away with the funds of their users, but they need a plan through which they are going to repay everyone but they can't do it at once and they would also stop their operations. Filing for bankruptcy doesn't mean that the exchange is free to walk away just like that. Of course, it's a different case if an exchange just shuts down all of a sudden and disappears, but regulated businesses can't do that.

[Natalim]

The bigger amount of bitcoin you have, the more that you have to push through for self-custody. This is the safest way to protect your coins and keep them on your own wallet for long, indefinite term without being interrupted by any centralized entity.

However, its not wrong to entrust a portion of your bitcoin into a reliable centralized exchange in the event of trading, but long term holding should always avoid centralized platforms. Bitcoin is your own bank, so always have the full control and custody of your coins by storing in a hardware wallet where no one can access but only you.

Self-custody is really necessary, its just that others do not realized it yet.

[Chinesebaby]

Is it better to leave our money in a large regulated institution, where there are rules and, if there is a problem, you can go to court?

I have seen many scenarios whereby a bank or financial institutions ran away with peoples money, and till today, they have never been able to recover their money, simply because maybe the user couldn't pay back or dead in the process. And in such case they court can only order him or her to pay you back, but can't force them if they had misused it. And that's where Bitcoin plays an important role in all this, due to the fact and ability to grant you full control over your money. And however, in regards to your second question which says if does it make sense to put all your money in self custody Bitcoin wallet? Then the honest answer to it is NO. But however, the majority of your money like 70% should be kept in Bitcoin self-custody wallet, whereas the remaining 30% can be kept in your bank for daily usage. And secondly, if you can afford different self custody Bitcoin wallet, it will be best, so as to avoid losing all your funds if one happens to be compromised, just like what happened to ColdCard wallet.

[Sanitough]

Nothing can beat self-custody but it does not work for everyone as there are really investors who don't want self-responsibility because it will only bring pressure and stress for them. They prefer the other way around, trusting a centralized exchange and totally believe that everything will be safe there. While I don't recommend this kind of mindset, but centralized exchanges can be trusted too, but only few and highly reputable ones.

However, diversifying your bitcoin and use them in various traditional investments could be a good idea too. At least you will have digital and traditional investments for diversification, if all them work out, you will surely gain multiple profits in the future.

[Japinat]

Yes, self-custody is highly essential. Those who have experienced getting hacked or scammed their bitcoin will definitely understand the real essence of self-custody. But those who have not experienced yet, they won't prioritized learning self-custody not because they don't want to, but some investors just want the easier way and avoid high responsibility.

However, they can't blame the exchange itself if something bad will happen to their bitcoin in the future. Otherwise, they should master and insist for self-custody in the first place because its the right and the best thing to do.

[Audrey Simmons]

Banks are way better than centralized exchange because if a Bank get bankrupt they will at least give insurance moneym. well if a exchange hack or something like this happens they will give nothing to users. Instead of keeping money in a bank you should buy gold and keep it in the bank in that way you will not lose the value of your money.
I only see two currency that can store for long and those are Bitcoin and gold and others are just for daily uses.

You also think buying physical gold and storing it in banks is safe? You didn't talk about self custody, gold can also be bought and held using self custody, why do you need the bank to have possession of your asset?

Self custody is what I advise investors to use, such knowledge isn't born with, everything is learnt and understood, self custodial knowledge is very comprehensible, starting with the basics before extending to a more technical side of security and wallet protection.

[Franklyn-wood]

People as customers make their mistakes by funding their accounts on centralized exchanges and consider their accounts as wallets for long term storage. Whatever they believe in and do after that are all wrong if they put the safety of their funds on exchange responsibility.

Exchanges can make their mistakes in security or customer fund management but firstly if their exchanges hacked, they suffered big losses, then customers will be next ones. Customers will only have big advantages in such situations as if an exchange is bankrupted, most users will lose all or most of money. At such time, it does not make any sense to blame responsibility on any entity, customers can not resolve anything and have to rely on that exchange as well as government while chance of getting money back is very small.

I am not in any way promoting centralised exchanges. But some of the exchanges that suffered from hacks or went bankrupt were able to repay users. Although it took so many years, MtGox users got back their money. Binance and others that have suffered challenges didn't allow it to affect users. Other centralised exchange users are unlucky and have not been able to recover their deposits, therefore keeping large funds in these exchanges is risky. Those who dont want to take responsibikty sholld be willing to suffer the consequences.

It is better not to safe on a centralized if one is willing to secure his or her investment. What we should always considered while securing our investment is first what is took us to get the funds accumulated, maybe it will help give some level of higher security consciousness that helps us seek for better ways to secure our funds in the right place and time.
The reason why centralized custody is on the high risk is because one need to trust there ability to safeguard his funds again losses from hackers or other forms of insecurities.

[Churchillvv]

-snip-

The biggest advantage of self custody is that you have control but it's hard to say it's the safest in all situations. Because if you lose a backup or seed phrase, you don't have the option to call an organization and ask for a solution. It's a bit like the keys to your bike, If you leave your bike in someone else's garage, you have nothing to do but watch if it gets stolen but if you keep the keys and bike with you, you can at least be safe. If you can handle the seed phrase a little carefully, self custody is the most reliable way to sleep peacefully in the crypto world. Honestly it's not about who prefers which method but rather understanding the risks according to your own usage pattern. So if you take self custody, you are also responsible for properly managing backup and device security.

Truth is that a lot of people are not really interested in trying to keep things safe by themselves but however they are just trying to escape the responsibility of keeping the coins by themselves, if you are really read to invest you should be able to handle whatever that comes with it, but however I don't really blame this people because first everyone has been used to leaving this type of responsibility to institutions like banks and the rest of them, so now if they just desire to invest, why most them be the people to take care of the wallet and its security, so relying on third party will always be the best option. self-custody only difficult theoretically but in reality just the way people are able to keep their bank passwords and so it is to keep your keys.

[Hamza2424]

And for someone who has a large amount of Bitcoin, does it really make sense to put everything in self-custody?

Maybe it is better to diversify not only between different forms of custody, but also between Bitcoin, traditional investments and regulated institutions.

Diversification is a must bro, don't put all your money on one asset, BTC is good but gold is also good, you can buy fifty fifty or you can buy whatever you like most but don't think buying BTC and ETH and some other alts is also diversification because that's not.

Bitcoin when it will go down the alts will also go down so diversification won't save you here, you have to buy assets that will not dump or pump when your other asset will make a move.

Right now everything works the same, gold started its pump sooner than BTC but eventually BTC has also pumped 10% and some alts pumped more than 10% but then comes the risk factor so don't think alts are a better choice they are not.

[Stable090]

Self-custody has been used for a long time, not only because it is customary but also because it is an additional means of guaranteeing that security measures are implemented. One of the things they will advise you to do is to safeguard your possessions. One of the security methods is self-custody. First of all, it is not a good idea to leave your bitcoin or any other cryptocurrency on exchanges instead, you should use a wallet.

Everyone is required to use self-custody, and this should be covered in the orientation for everyone we bring to the crypto space. Security should always come first, even before making a purchase, as most people are unaware of how crucial it is.