Cryptocurrency requires management and proper guidance so that investors don’t get taken advantage of. It is not a great idea to keep Cryptocurrency on exchanges. Cryptocurrency should only be kept in exchanges for various reasons. In this article we’ll show you why It is not a good idea to keep cryptocurrency on exchanges.

Exchanges are Always Under Constant Attacks

As of 2021 most of the top tier liquid cryptocurrency exchanges are centralized. Furthermore, this means that they are governed over by a central authority or figurehead. This is dangerous because these exchanges since they operate online are subject to hacking attempts.

Since Bitcoin and other cryptocurrencies hold value and are pseudo anonymous, they make a very nice target for hackers. Exchanges such as Binance, Coinbase and Huobi meet constant hacking attempts by hackers from every part of the world.

Over the years these hackers have been successful. For instance, in 2014, the crypto exchange Mt. Gox suffered a hack. They lost about 460 million dollars’ worth of crypto. Their customers, which where Bitcoin traders and investors lost their money!

Even the best exchange, Binance has gotten hacked. In May of 2019, some hacker’s tole 40 million dollars’ worth of crypto. They managed to steal 7000 Bitcoins. Binance did reimburse their customers money however it is important to learn the lesson here. No exchange is completely secure from hackers.

Had the hack been larger, Billion’s worth would have been stolen from traders and investors. Because of these it is better not to keep crypto in centralized exchanges.

The best solution to minimize this risk is to keep personal cryptocurrency in cold wallets like in the Ledger nano devices. Cold wallets have no access to the internet. This makes hacking attempts difficult. These wallets require physical access to be able to be hacked.

Centralized Exchanges can Steal your Funds

Some exchanges are shady, they operate in unknown jurisdictions and have unknown operators. This is important to note because they can disappear one day with all the customers funds, and you won’t ever hear from them again. It is important to trade in exchanges which you know you can trust.

KuCoin a smaller, yet popular cryptocurrency got hacked by insiders. Inside employees took about 150 million worth of crypto and left the exchange. It was difficult to track these people. This is another reason why it is not a good idea to keep crypto on exchanges. The owners, or employees of a centralized exchange can run with your funds, and you may never get it back.

KuCoin a smaller, yet popular cryptocurrency got hacked by insiders. Inside employees took about 150 million worth of crypto and left the exchange. It was difficult to track these people. This is another reason why it is not a good idea to keep crypto on exchanges. The owners, or employees of a centralized exchange can run with your funds, and you may never get it back.

There is a saying “Not your keys, not your crypto” meaning that if you don’t hold the private keys of your crypto, the crypto isn’t really yours! And this is true to an extent. A centralized exchange can run away with your crypto at any time they want. They can do this because your crypto is in their wallets and they have complete control of it.

Centralized Exchanges Lock your Account and May Not let You Access Your Funds

Sometimes exchanges mess up, other times your account may be compromised for some unknown or unordinary reason.

Coinbase for example is known for this. Sometimes they lock your account if they see something suspicious happen. If they lock your account, not only may you not be able to access your funds, but you may also not be able to retrieve them as well. It is because of these risks that it is not a good idea to leave crypto on exchanges.

It could take weeks or even months before they allow access to your account again. If it gets involved in illegal activities, they may even confiscate your funds and close down your account.

Some exchanges don’t allow customers from using their exchange if they are residents from the US. These customers then use VPNs to access the exchange. Users can be locked away from their funds if the exchange demands KYC documents to be submitted.

Summary

It is not a good idea to leave crypto on an exchange because there will always be a risk of losing it. If you’re going to trade, only leave an amount of crypto that you’re comfortable with losing.

Hopefully this article cleared some confusion about Centralized Exchanges and the risks with keeping your crypto with them. If you would like to support us, please share this article with your friends or family.