Why are investors more likely to hold Bitcoin in exchange wallets?

[UpTober]

We have seen this before that some popular exchanges have been hacked, but we have not stopped using exchange wallets for long-term holding from that place. Maybe there are some things that investors always ignore the various risks.

Perhaps users give more priority to the conveniences, such as when using exchange wallets, there is usually no need to store the Seed Phrase separately, similarly, there is no risk of losing the Seed Phrase, so maybe they consider exchange wallets safe to store their Bitcoin. Similarly, through exchange wallets, buying and selling can be done very easily and there is no need to transfer Bitcoin using a specific address. Maybe considering this overall issue, investors use such exchange wallets to maintain their investments for the long term despite the risks of using exchange wallets.

I think we should be extremely careful from now on, because with the amount of money the world's best exchange like Binance lost in a short-term attack, there is no guarantee that our hard-earned Bitcoins will not end up in the hands of hackers in an instant. Even though exchange wallets have some advantages, I think we should think long-term and prioritize the security of our investments.

[menachange]

I think you named the real reason: people aren't choosing the exchange, they're avoiding the seed phrase. For many, losing the seed feels scarier than an exchange hack, because a hack is someone else's fault.

But a safe backup is less work than it sounds. Write the seed on paper or metal, keep two copies in two different places, never store it as a photo or in the cloud, and do one test: restore the wallet from the backup with a small amount before you move everything. If the restore works, you've already removed most of the risk.

Also worth noting: Binance has the money to promise full refunds. A smaller exchange hit by the same attack usually doesn't, and that's where holders lose everything. A simple split works for most people: keep on the exchange only what you're actively trading, and the rest in a wallet you control.

[Russlenat]

I think we cannot assume that they hold their Bitcoin on exchanges, I believe that most of the Bitcoin on exchanges is from people who are also actively trading as well. Some may HODL there for the long term but only a small percentage I guess.

But if they hold there they have a reason too as even hardware wallets can be compromised, just like the tampered Ledger hardware wallets, so for people who do not know how to protect their wallets they choose exchanges especially if an exchange has SAFU and has never failed to compensate their clients every time a hack happens (talking about Binance). Both hardware wallets and exchanges have risks it just depends on how the person weighs things up.

[Joy_learns_crypto]

We have seen this before that some popular exchanges have been hacked, but we have not stopped using exchange wallets for long-term holding from that place. Maybe there are some things that investors always ignore the various risks.

Perhaps users give more priority to the conveniences, such as when using exchange wallets, there is usually no need to store the Seed Phrase separately, similarly, there is no risk of losing the Seed Phrase, so maybe they consider exchange wallets safe to store their Bitcoin. Similarly, through exchange wallets, buying and selling can be done very easily and there is no need to transfer Bitcoin using a specific address. Maybe considering this overall issue, investors use such exchange wallets to maintain their investments for the long term despite the risks of using exchange wallets.

I think we should be extremely careful from now on, because with the amount of money the world's best exchange like Binance lost in a short-term attack, there is no guarantee that our hard-earned Bitcoins will not end up in the hands of hackers in an instant. Even though exchange wallets have some advantages, I think we should think long-term and prioritize the security of our investments.

I don't think there is any one who owns Bitcoin that have a problem with storing their seed phrase, and I also not concur with. Your idea that they consider exchange wallet safe, but I totally agree that it's about the easy trading, buying and selling, swaps, transfers across many networks.
Some people are aware that they shouldn't store their Bitcoin on an exchange but they are involved in business that requires them to be swift so they have bulk of their savings on their private wallet and funds for their business on exchange the funds are mostly what they can afford to lose.

[Frankolala]

Self custody is the best way to store your bitcoin and not in an exchange because you have given out your bitcoin to someone else to be in charge and they cannot even keep it as safe as you can because they're hackers target. You can use a mutisig wallet or use a cold storage wallet that the keys are always offline if you have an old laptop which you are no longer using. Of course, the best safety is to store your coins in more than one wallet.

[tbct_mt2]

We have seen this before that some popular exchanges have been hacked, but we have not stopped using exchange wallets for long-term holding from that place. Maybe there are some things that investors always ignore the various risks.

Exchanges are never good and safe places to store your fund a long time, and it's true for everyone. It's the same with either investors and traders but of course, if you are an investor and store fund on exchange, your practice is worse than traders. If you don't have need of active trading - because you are an investor - but still store fund on exchanges as same as active traders, you do a very terrible fund storage practice.

I think we should be extremely careful from now on, because with the amount of money the world's best exchange like Binance lost in a short-term attack

Binance was not hacked a first time, and Binance is not the first centralized exchange was ever hacked, there are many exchanges hacked, even bankrupted or scam exited.
Cryptocurrency exchange graveyard.
List of cryptocurrency exchange hacks.
Reminder: do not keep your money in online accounts.

[kingstep]

I think we should be extremely careful from now on, because with the amount of money the world's best exchange like Binance lost in a short-term attack, there is no guarantee that our hard-earned Bitcoins will not end up in the hands of hackers in an instant. Even though exchange wallets have some advantages, I think we should think long-term and prioritize the security of our investments.

This is not the first time exchanges have been attacked and certainly, it is not going to be the last time. the concern is, will people learn the right lesson? the odds are little and in most cases, because of the convenient that comes with just leaving your asset i an exchange, it is going to be more preferred that looking out for a more secured means.

Self custodial wallet is the best option and even those leaving their asset in an exchange already knows this. the bigger challenge is that hackers are targeting almost everything and are not leaving anything untouched. regardless what you are using, you just have to take extra precaution to be sure you are on a safer side.

[dzungmobile]

This is not the first time exchanges have been attacked and certainly, it is not going to be the last time. the concern is, will people learn the right lesson? the odds are little and in most cases, because of the convenient that comes with just leaving your asset i an exchange, it is going to be more preferred that looking out for a more secured means.

When you store fund on centralized exchanges with your accounts there, there are many risks of losing your money, not only from hacks on exchanges.
With all dramas and incidents with exchanges in history, if people still wait for a latest hack on Binance to realize risk of fund storage on centralized exchanges, they already ignored many security reminders.

Events made you scare about custodial wallets, centralized exchanges.
Be careful using Binance & Centralized Exchange.
OKX frozen my account and required me to KYC with a less than $1,000 deposit.

[RGBTC]

Centralized platforms offer various advantages for user activities:

• Trading fees
• Free off-chain transfers
• VIP rewards
• Liquidity provider for lending, staking, ect
• Access to hundreds of trading pairs
• Regulated custody (+SAFU)

Public trust in centralized platforms will persist until they are unable to cover losses. Likely, only a small fraction of users utilize these platforms for long-term passive custody; the rest are engaged in active business.

[salad daging]

There are many reasons why investors still trust storing assets on the exchange with many attractive offers.
Binance, Bybit, Bitget have been hacked in large numbers, but the platform still managed to rise not to charge losses to its customers, which is probably what other investors still believe, although I myself have never advised it.
Do not think of others, better ourselves how to do his, safe anticipation so as not to become a victim, hardware or software wallet.

[348Judah]

We have seen this before that some popular exchanges have been hacked, but we have not stopped using exchange wallets for long-term holding from that place. Maybe there are some things that investors always ignore the various risks.

Anyone that has ever come across this thread below or was being informed by someone to take action against the use of recentralized exchange will understand more better why it does not being advisable to engage them from onset.

Events made you scare about custodial wallets, centralized exchanges
https://bitcointalk.org/index.php?topic=5509759.0

The only reason that some are using in holding their assets on a centralized exchange is when you are ready to trade it for Fiat, but that is not even an excuse enough because you can always make use of a decentralized one instead of using a centralized exchange.

I see also that most of the traders are the ones that are mostly concerned in using centralized exchange for trading, but they should know better because they are taking risk of the huge amount they are using for trading on this platforms being prone to hacks or go bankrupt.

[Charles-Tim]

Perhaps users give more priority to the conveniences, such as when using exchange wallets, there is usually no need to store the Seed Phrase separately, similarly, there is no risk of losing the Seed Phrase, so maybe they consider exchange wallets safe to store their Bitcoin. Simi

Having seed phrase back up in two or three locations is not something hard to do. I do not see exchanges as convenient means of keeping your bitcoin and other cryptocurrencies. But maybe this is true for some people. Even transactions on noncustodial wallets are faster and cheapera and you have full control.

[adultcrypto]

At first the post appear like you are advocating for the use of centralized exchanges for holding if we consider the several reasons you gave in support of that. But the counter reason you gave in your last paragraph shows you still understood the risk of using exchange for holding. Assuming Binance do not have the funds to cover the loss, there is absolutely nothing anyone, whose money was stolen, can do. It is still better to store bitcoin in personal wallet where the investor controls the private keys. It saves people the stress and the situation that binance user are in right now which make them unable to make withdrawal since after the hack.

[Pandorak]

We have seen this before that some popular exchanges have been hacked, but we have not stopped using exchange wallets for long-term holding from that place. Maybe there are some things that investors always ignore the various risks.

Perhaps users give more priority to the conveniences, such as when using exchange wallets, there is usually no need to store the Seed Phrase separately, similarly, there is no risk of losing the Seed Phrase, so maybe they consider exchange wallets safe to store their Bitcoin. Similarly, through exchange wallets, buying and selling can be done very easily and there is no need to transfer Bitcoin using a specific address. Maybe considering this overall issue, investors use such exchange wallets to maintain their investments for the long term despite the risks of using exchange wallets.

I think we should be extremely careful from now on, because with the amount of money the world's best exchange like Binance lost in a short-term attack, there is no guarantee that our hard-earned Bitcoins will not end up in the hands of hackers in an instant. Even though exchange wallets have some advantages, I think we should think long-term and prioritize the security of our investments.

You’ve explained very well why a small portion of investors choose to keep their Bitcoin on exchanges, simply put, they don’t want the hassle.

Maybe i'll add a little more. From my experience meeting people who also invest in Bitcoin, many of them still keep their Bitcoin on exchanges. The main reason is often the amount of Bitcoin they hold, they feel it’s not that large right now, so why go to the trouble of storing it in a cold wallet, especially after recent hacking incidents, they believe keeping it on an exchange or in a cold wallet is essentially the same, both carry risks. On the other hand, if a hack occurs on an exchange, there’s a good chance the Bitcoin will remain safe, because the exchange will certainly take full responsibility, as was the case with the recent Binance incident. Although the possibility of something like FTX happening will still exist.

[Multani Boy]

You’ve explained very well why a small portion of investors choose to keep their Bitcoin on exchanges, simply put, they don’t want the hassle.

Maybe i'll add a little more. From my experience meeting people who also invest in Bitcoin, many of them still keep their Bitcoin on exchanges. The main reason is often the amount of Bitcoin they hold, they feel it’s not that large right now, so why go to the trouble of storing it in a cold wallet, especially after recent hacking incidents, they believe keeping it on an exchange or in a cold wallet is essentially the same, both carry risks. On the other hand, if a hack occurs on an exchange, there’s a good chance the Bitcoin will remain safe, because the exchange will certainly take full responsibility, as was the case with the recent Binance incident. Although the possibility of something like FTX happening will still exist.

However, there may be a perception of risk based on what happened at Binance. The expectation is that the exchange will compensate users for their losses but this is not something that can be done by all exchanges. Even if it has sufficient reserves, it is still at the mercy of the exchange wanting to compensate users and also ensuring they can continue to withdraw during the crisis. This is a different risk to self custody. You are not reliant on the solvency of an exchange, but you must ensure your keys are secure.

[Hyphen(-)]

Perhaps users give more priority to the conveniences, such as when using exchange wallets, there is usually no need to store the Seed Phrase separately, similarly, there is no risk of losing the Seed Phrase, so maybe they consider exchange wallets safe to store their Bitcoin. Similarly, through exchange wallets, buying and selling can be done very easily and there is no need to transfer Bitcoin using a specific address. Maybe considering this overall issue, investors use such exchange wallets to maintain their investments for the long term despite the risks of using exchange wallets.

Exchange wallets are not safe, but as you said, some people prefer using it to avoid the stress of saving their seed phrase which is true for some people, while some people don’t have the knowledge about the non-custodial wallet, so they go with what they know.

However, some of us here are using exchange wallets to receive payment from our various signature campaigns not because we are willing to hold our Bitcoin there, but maybe to receive it through exchanges and send the part they will invest on long term to their personal wallets, I don’t know for others, but I think that’s the reason for using exchange wallets for people like me.

We need to be responsible for our investments, keeping our seed phrase safe is part of responsibility if we want to be decentralized and don’t rely on anyone to hold our Bitcoin. We are learning our lessons about these centralized systems everyday, I think we keep learning every day.

[maydna]

The simple reason why they do that is because they can directly sell their asset without waiting for the deposit confirmation and of course, they don't have confusing about the fee. Many times investors or traders think twice about the fee which they think that is too high. By hodl Bitcoin in exchange wallets, that can cover the fee but that is not a suggestion to keep Bitcoin in exchanges.

We don't know exchanges can stay out from the hackers radar or when the exchanges becoming the target. We should keep Bitcoin in our wallets because that is our responsibility. Remember, not your key, not your coin.

[MisFoxie]

I don't know whether investors actually use exchange wallets but it's true that using exchange wallets can also be risky especially when you have a large amount of funds. Normally wallets are much safer than exchanges but there could be a problem with exchange keyless wallet. For example you deposit a large amount of funds into it then the exchange removes access to your wallet and asks you to import it again. When you try to import it you find that your wallet is no longer there. What will happen then? All your funds will be gone.

[Hamza2424]

We have seen this before that some popular exchanges have been hacked, but we have not stopped using exchange wallets for long-term holding from that place. Maybe there are some things that investors always ignore the various risks.

Bro, I have always advised everyone not to hold their funds on centralized exchanges unless they have to trade consistently. Believe me or not, the majority had their funds on Binance or CEXs, and they never cared because Binance claimed that they would recover the customers' funds.

No one is going to leave these CEXs, especially Binance, because it is advertising in itself. Think for a second. When you want to hold $1 million, you have two options. One is a Coldcard-kind of wallet, and the other is Binance, which I think was hacked once in 2018, after which they introduced SAFU.

Still, they have promised to take care of all those affected. What do you think the majority will choose between these two options? The one where they get a second chance, right?

[Vvang]

Keeping seed phrase is a big burden to many people, see what happened to Binance? Everyone is getting their money back, people who can't hold seed phrases will be happy because it's their kind of news.

"Yes this is why I don't like seed phrases, because if this hack happened to me I am not getting anything back but if I keep it on Binance and a hack happens they will pay me back".

This is encouraging keeping coins on centralised exchanges and they will left out the part that not all centralised exchanges are like Binance exchange, even Binance exchange can go down the drain one day too..