Bitcoin exchanges have changed the cryptocurrency game completely. These are online platforms that allow users to trade their crypto tokens. Users can exchange their tokens for other crypto tokens according to their values. Crypto exchanges make it very convenient for users to access almost all types of coins.
To use these exchange platforms, one has to create an account and deposit crypto coins on the platform. Because of how convenient it is to trade directly from the exchange accounts, most people often leave their coins on their exchange accounts. This way, they are able to react quickly and buy or sell depending on how the situation on the market looks like. Now, when we all are waiting for bitcoin halving to come and cause significant price movements, it can be especially important to be ready for trading.
But is it really safe to keep crypto coins on exchanges? What is the level of security in these exchange platforms? How should you securely keep your crypto coins?
Is It Safe to Leave Crypto Coins on Exchange Platforms?
The answer is simple-NO! It is not safe to keep your funds on exchange platforms for a long period of time. Your funds’ safety is not guaranteed on exchange platforms. Below you can see the reasons why it is unsafe to keep funds on exchanges.
Why It Is Unsafe To Keep Funds on Exchanges
- Exchanges Can Be Hacked
Although most reputable exchanges are properly secured, they are not immune to hacking. It has happened before and can happen again at any time. Exchanges are just websites and hackers can find their way through to your accounts and siphon away your coins.
Major exchange platforms have been hacked in the past and this should be a reason enough for you to desist from leaving your funds on the platforms for too long. Ideally, you should use a crypto exchange platform only for holding the funds while you trade and once you are done, you should withdraw the funds back to your cold wallet. Read on to understand more about cold wallets.
- Exchange Platform Owners Can Abruptly Shut Down or Die!
Yes, exchange platforms can go under without notice. They are just businesses like any other and can shut down at any moment. In extreme cases, the owners can die and leave all the investors wondering how to get their money back.
One of the most infamous crypto exchange stories is the Quadriga Saga. The CEO of Quadriga Gerald Cotten allegedly died and took with him millions of investors’ funds because he was the only one with access to the accounts where the funds were stored. You can imagine the shock of the thousands who had invested on the platform when they learned of the untimely death of the man who was holding their life savings.
Save for reputation and maybe trust, there really is no other guarantee to warrant the safety of your coins on any platform. One only invests and hopes that nothing will go wrong and that the funds will still be available the next morning.
- Exchange Platforms are Unregulated
There is no official regulating body that holds exchange platforms to account. There are no rules by which the platforms operate. This lack of proper regulation makes it very risky to fully trust these platforms with your hard-earned money.
If anything were to happen to the exchange platform, there literally is nobody to report to except maybe the authorities. Sometimes, even the authorities can decide to bring the hammer down on crypto exchange platforms like recently in Korea. Such moves leave investors in limbo as they literally don’t know who to run to and all they can do is wait and hope for the best.
- Your Money Is Not In Your Custody
When you deposit your coins into exchanges, you are simply relinquishing custody over your funds. You are no longer in control of what happens to your coins. The most that you can do while the money is on an exchange is to trade. Up until you withdraw your funds back, anything can happen.
Safest Means to Keep Your Crypto Coins
So, it is advisable to always store your money on wallets which you own. Moreover, there are different wallets available for you to keep your funds safe. Wallets are much safer than exchanges because you are the only person who has access to your account. Such storage comes with a private key which is a unique combination needed to access the funds stored in the wallet.
You can also consider going a step further and buying a hardware wallet. In short, this isa device that stores your digital asset. A hardware wallet gives you a real feeling of ownership of your coins because you literally can see and feel it. Such devices are very compact and portable which means you can take them anywhere with you.
Although they are relatively more expensive to buy than hot wallets, they are the safest means of keeping your coins safe. You just need to make sure that you are the only one who knows the private key to access the funds.
While digital exchange platforms have changed how we trade cryptocurrencies, they are still vulnerable to cyber-attacks. Therefore, the only time when you should keep your crypto coins on the platforms is when you actually want to trade. Once you are done with the trading activities, move your funds to a safer wallet.
It might be time-consuming to move your funds every time you want to trade but it is always better to be safe than sorry.