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

[snowpega]

....
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.
...

Haha, bro, are you sure? From the recent news, I came across many users leaving Binance for their own safety.
And according to this article here...>> Users pulled nearly $3.8 billion off Binance in roughly 10 hours. So isn't this enough for us to make sure people are also losing their trust in even Binance Exchange, even though we know it's the world's biggest crypto exchange? The fact is that, with the passage of time, people are getting wise enough; they are starting to realise the nuance of this matter: how risky it can be to hold major funds on CEX platforms. But some people are still holding their funds on CEX platforms even after these incidents. What do you want to say about this?

The another fact major people still stick to using these CEX platforms is also due to P2P feature. I don't know if there is any DEX P2P platform available in the market which is also trustworthy.

[Jerrycrypto2024]

I will draw my idea and knowledge through what a friend who also encourage me to invest in Bitcoin and crypto generally told me because his a qn example of investor that holds in exchange, that it's easy to check and know the level of yeild what they invested have acrid or amount than when stored in selfcustodian and most investor mostly those that don't hold much don't moving their asset time to time knowing too well it's lesser asset they have, no heavy investor will prefer exchange rather will store in self custodian, while some keeps the asset in exchange as a result of trust but forgot that been centralized is dangerous as it's more like market exposed to many danger, those that keeps their asset have their reason that may not even make sense but makes sense to them as believe.

[Z_MBFM]

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.

A big reason here may be that investors worry that if they lose their Seed Phrase for some reason, they will never be able to access their Bitcoins again. But on a centralized platform, if they forget their password, they can reset it via email. If they lose 2FA, they can recover it again with the KYC document. Perhaps they take risks thinking about these things. And if the amount is small, they don't worry too much about it. But those who invest in large amounts do not put their funds at risk by using centralized exchanges.

[Xackie]

One the reason why I like using Exchanges is because of how easy it is to convert your crypto like USDT to your local currency.  I use both together, but what I use my exchange for is saving some  USDT and small portions of bitcoin, while my private wallet is mainly for bitcoin. Nothing is entirely risk free, which is why I am using both platforms. If it's your choice to us an exchange to keep your bitcoin then you will have use the ones that have strong foundations like Binance, Bybit, Coinbase. We saw the rapid response from Binance when they got hacked, but for a  smaller exchange i don't think they might  have the financial strength or resources to recover users' funds in a similar situation.

[retreat]

Not everyone is ready for self-custody. More people choose to keep their Bitcoin on an exchange because they can send and trade it quickly. They also don't have to manage their private keys, which for some people is really troublesome.

But soon they'll realize that self-custody is the best choice if they want security. Even though exchanges offer convenience, their Bitcoin is still controlled by a third party, and they don't have full control over their Bitcoin anymore. However, if they choose self custody, they can control their Bitcoin completely and they don't have to worry that when the exchange goes bankrupt it will affect their assets.

[Apex_1]

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.

Most investors rely entirely on exchange wallet to store their Bitcoin because they can easily buy, sell and even swap their Bitcoin instantly within the exchange platform without the need of manual on-chain transfer because in exchange platform you skip all of that process.

But they should also have it in mind that when they leave their Bitcoin in an exchange wallet for a long term period it does not mean that they actually own it because true ownership of the Bitcoin is the exchange platform that own the private keys to access the Bitcoin and allows the Bitcoin in the exchange wallet to be spent on the blockchain.

So the best way for Investors to protect their Bitcoin is to move their it to a safe custody wallet where they are fully responsible for safety recording and keeping their seed phrase. And also if they intend to keep their Bitcoin in an exchange wallet it should only be the Bitcoin that they actively intend to trade in the short term and not for long term period of time.

[Exitoral]

Does Investors really hold their Bitcoin in exchange wallets? I don't think so, most of the people who should be holding more in exchanges are people who do trade time to time or probably full time. I will dare not leave a huge chunk of my Bitcoin asset in an exchange, that is unreasonable to me, especially when my intention is to hold for several years.

I doubt big time investor would hold in exchanges, except he/she is not ready to hold Bitcoin for a long period of time leaving it there for easy liquidating

[Issa56]

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.

I don’t really know what some people think, we have been experiencing lots of hacks this year, but some people are still going to hold their coin on exchange, it’s not really making sense, and some people are not ready to listen to correction. I feel since all this hack has been happening, people are always recovering their money, that’s the reason why they keep on leaving their coin on exchange.

If a hack happens to exchange, and their funds are affected, maybe they will learn a lesson, and they going to stop leaving their coin on exchange. It’s better you are in control of your funds, instead of another person to be the one controlling your money for you.

[UpTober]

Investors or traders, exchanges are never safe places for storage, either short term storage and long term storage.

But in the case of trading, you have to keep money in the exchange wallet. Trading, as we generally know, means buying at a low price and selling it at a certain profit. Now, since the exchange is the best medium for such buying and selling, you have to keep money here even if it is at some risk. However, even if you keep money in the exchange wallet for trading, it cannot be kept in a large amount, but it should be kept in a limited amount as it is regularly usable. And you have said another cautionary thing here that apart from fraud, a user can lose his money, be it by transferring funds to the wrong address or by not saving his important private information properly. We should be careful and attentive to these things, only then can we protect our money.

[Outhue]

I have thought about it too, this was after someone I know to be a Bitcoin investor said something this similar, that he would rather leave his coins on Coinbase because whatever happens to it they will take responsibility compared to leaving it in a cold storage that if they lost access to the cold storage or they stole the Bitcoin in the cold storage it's gone forever, people are convenient leaving their Bitcoin on big exchanges due to possible loss and regain.

[Betwrong]

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. ~

They are doing so because in most cases it is safe. Another reason is they want to have big amounts in their exchange wallets to be able to earn more with their trading. If you earn 5% out of $200, it's just $10 - nothing. But if you use $20k for the same operation - you earn $1k. This kind of logic. Personally, I don't think people should risk large amounts of money just to make more, and I tell people this all the time, but they never seem to listen.

[Iranus]

Haha, bro, are you sure? From the recent news, I came across many users leaving Binance for their own safety.
And according to this article here...>> Users pulled nearly $3.8 billion off Binance in roughly 10 hours. So isn't this enough for us to make sure people are also losing their trust in even Binance Exchange, even though we know it's the world's biggest crypto exchange? The fact is that, with the passage of time, people are getting wise enough; they are starting to realise the nuance of this matter: how risky it can be to hold major funds on CEX platforms. But some people are still holding their funds on CEX platforms even after these incidents. What do you want to say about this?

The another fact major people still stick to using these CEX platforms is also due to P2P feature. I don't know if there is any DEX P2P platform available in the market which is also trustworthy.

Binance said net withdrawals reached $3.64b while deposits were $1.01b. Sounds huge, but did you know that's only about 2% of Binance's $171b in total assets? Basically a drop in the bucket.

Besides, a wave of withdrawals from an exchange that's just been hacked is hardly surprising. What we don't know, though, is where those funds went. Did they move to other exchanges, into cold storage, or leave the market altogether?

This isn't the first time a CEX has been hacked, either. So I wouldn't be so quick to say folks are wising up to the risks of keeping their funds on CEXs.

[Yamifoud]

Some reasons are;

1. They are active traders, not just investors—so using an exchange wallet saves them costs from moving their crypto in and out.
2. Additional earning opportunities—through staking, holders will earn some amount. Not huge, but at least there is, unlike keeping it in hardware or an Electrum wallet.
3. Account recovery—in the case you lose your device, you can still recover your account. But not when you are just relying on keys.

If we talk about hacking? It happens to everyone, regardless of whether it is an exchange wallet or a personal wallet.

[Call_Me_Guru]

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.

You have the idea of some of the reasons most people prefer custodial and centralized crypto systems. They are created for comfort, convenience, fast business, the speed is of exchange is there and the charges are little. Using non-custodial and decentralized systems are not the same thing, they could give you thenfeeling of the absolute ownership but they are not as convenient as the earlier mentioned category.

Here is the smart part. I don't tell people to be 100% non-custodial and decentralized, but ensure that when you know you are keeping your coins for long-term and transacting big. Maintain a low amount that you can afford to lose with custodial and centralised systems.

[Gost ms]

Haha, bro, are you sure? From the recent news, I came across many users leaving Binance for their own safety.
And according to this article here...>> Users pulled nearly $3.8 billion off Binance in roughly 10 hours. So isn't this enough for us to make sure people are also losing their trust in even Binance Exchange, even though we know it's the world's biggest crypto exchange? The fact is that, with the passage of time, people are getting wise enough; they are starting to realise the nuance of this matter: how risky it can be to hold major funds on CEX platforms. But some people are still holding their funds on CEX platforms even after these incidents. What do you want to say about this?

The another fact major people still stick to using these CEX platforms is also due to P2P feature. I don't know if there is any DEX P2P platform available in the market which is also trustworthy.

Binance said net withdrawals reached $3.64b while deposits were $1.01b. Sounds huge, but did you know that's only about 2% of Binance's $171b in total assets? Basically a drop in the bucket.

Besides, a wave of withdrawals from an exchange that's just been hacked is hardly surprising. What we don't know, though, is where those funds went. Did they move to other exchanges, into cold storage, or leave the market altogether?

This isn't the first time a CEX has been hacked, either. So I wouldn't be so quick to say folks are wising up to the risks of keeping their funds on CEXs.

Yes you are right I completely agree with you, but for Binance the amount may be a very small amount and if Binance could not recover an amount of Bitcoin they would have been able to compensate everyone and even then Binance would not have had such a big impact. But seeing this as just a financial loss will never be the right decision but it needs to be seen from the perspective of the trust and security of each user. Because after the Binance hack, a question has arisen in the minds of many whether it will be good to use Binance in the future or is Binance still very safe.

Keeping everything related to Bitcoin safe with yourself seems to me to be the best decision. Because instead of keeping Bitcoin in a centralized exchange, keep Bitcoin in a decentralized exchange

[The Cryptovator]

The reason is almost all you have written. It doesn’t make sense storing our Bitcoin on the centralised exchange. Simply, we can move funds into a hardware wallet or any noncustodial wallet and move them back to the exchange when we need to sell our Bitcoin.

During the Binance hack, I had only $34 in BNB; it was just for trading fees. The rest of the funds go into a hardware wallet; when I need to sell, I move to the exchange and sell. My stable coins are also stored in a hardware wallet. But choosing a hardware wallet became more complicated after the Ledger hack.

However, I have learnt a lesson. Everyone should take a lesson from the recent incidents; otherwise, we have to suffer.

[hmbdofficial]

I don’t really know what some people think, we have been experiencing lots of hacks this year, but some people are still going to hold their coin on exchange, it’s not really making sense, and some people are not ready to listen to correction. I feel since all this hack has been happening, people are always recovering their money, that’s the reason why they keep on leaving their coin on exchange.

If a hack happens to exchange, and their funds are affected, maybe they will learn a lesson, and they going to stop leaving their coin on exchange. It’s better you are in control of your funds, instead of another person to be the one controlling your money for you.

The hacks this year has been on both the exchanges and even self custody wallet. so none seems to be fully safe and guaranteed of 100% safety of funds. not quite long there was some vulnerability with the firmware that generates seed phrase for the hardware wallet, and a lot of people lost their fund and there was no refund because its a self custody wallet and you are fully responsible for you funds.

i know issues that can come with using exchanges that are not reputable enough in cases like where the company cannot compensate for the loss funds, users are the one to take the loses. but when dealing with a reputable exchange i think its safe to an extent if your fund are truly SAFU.

I am not saying people should not practice self custody but i feel exchanges also have some reputable ones we can trust at least.

[Lontor]

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.

There is no data to back this up, the real number might be shocking if there is a way to get it, there are people saying that leaving their Bitcoin on any top crypto exchanges is safer than using a hot wallet or a hardware wallet.

The Centralised bank operation have gotten the best of them, if money is stolen in a bank account who will pay for it if not the banks? This is what they want and that's why a guy can sleep peacefully at night leaving 500k on Binance exchange.

Many people don't care about decentralisation, this is why I believe the numbers of people that prefers to leave their Bitcoin on an exchanges are not small.

[BALIK]

I have thought about it too, this was after someone I know to be a Bitcoin investor said something this similar, that he would rather leave his coins on Coinbase because whatever happens to it they will take responsibility compared to leaving it in a cold storage that if they lost access to the cold storage or they stole the Bitcoin in the cold storage it's gone forever, people are convenient leaving their Bitcoin on big exchanges due to possible loss and regain.

IMO it's just a habit thing more than anything, and old habits die hard.  

For decades, most people have been used to putting their money in bank and relying on intermediaries to protect their funds and help them out when something goes wrong.  So selfcustody, where you are responsible for your own private keys, still seems a little foreign to many people.

Also , most people in the market these days are chasing profit. Hardly anyone really cares about privacy or decentralization like they did in the early years . No wonder the majority will stay glued to centralized platforms, regardless of the big hacks that have already cost people a fortune.

[blockman]

I have thought about it too, this was after someone I know to be a Bitcoin investor said something this similar, that he would rather leave his coins on Coinbase because whatever happens to it they will take responsibility compared to leaving it in a cold storage that if they lost access to the cold storage or they stole the Bitcoin in the cold storage it's gone forever, people are convenient leaving their Bitcoin on big exchanges due to possible loss and regain.

That's a newbie thought and I think it's because they're beginner friendly and this is what these investors think about leaving it on exchanges. While there could be some point in doing it but, we know that it's best to have the custody of our coins in ourselves. Yeah, these exchanges can pay for the damages of the hack funds. Now, what if there are no more safu, there are no more reserved funds that they're going to spend on future incidents?