Cryptocurrency exchanges are the primary way to buy and sell cryptocurrencies, but they are not a safe place to store long-term assets. There are several reasons why you should avoid using CEX as a storage solution for your crypto assets.
Centralized exchanges control your funds
Cryptocurrency exchanges control your funds and private keys. If you want to access, send or receive your coins, you need to authorize them. If the exchange is hacked, it may take some time before you can access your digital funds again.
In addition to this disadvantage, governments can shut down centralized exchanges at any time, making your coins inaccessible forever! There have been many cases of governments trying to crack down cryptocurrency traders shutting down the centralized cryptocurrency exchanges they use. Even though it’s not that common today, always opt for self-custody solutions whenever possible.
I’m not a bank
- They don’t have a vault to keep your funds safe in case of a hack or other disaster.
- They can’t pay interest on deposits, so there’s no reason to entrust them with funds unless you need them.
In short, centralized exchanges are like the Wild West of money and cryptocurrency storage. There is no sheriff in town, and if you don’t protect yourself, all kinds of complicated situations can happen.
Your personal information is at risk
There are many reasons why people choose to keep their cryptocurrency on centralized exchanges. But there are also many reasons why you shouldn’t. The security of your funds, mainly your personal information, is among the greatest.
- You don’t check your private keys. When you deposit cryptocurrency on a centralized exchange, it stays until you withdraw it or sell it for fiat currency. When hackers attack an exchange and steal funds from users, those users don’t lose their coins. They lose access to them until the hacker decides to give them back. And if a trade closes unexpectedly due to legal issues or something else, then all bets are off.
- There have been examples where governments have asked for access. Countries like India have a history of government intervention! There have been numerous “bans” on trading, only to later be reinstated. Such cycles can repeat themselves over and over, especially when cryptocurrency becomes “too popular” in such countries.
Centralized exchanges are not safe places to store money for the long term
First let’s make sure everyone understands what a cryptocurrency exchange is. It is an online platform where you can buy and sell currencies such as Bitcoin, Ethereum and others.
When deciding whether or not to use any of these platforms to hold your cryptocurrency for the long term, it’s important to understand what they are and how they work.
Each exchange works like a bank by controlling users’ funds. No user can do anything without the express permission of the exchange.
The most important thing to remember is that centralized exchanges are not banks.
They’re not where you should be storing your funds long-term, and they don’t offer the same level of security as a bank account.
So, if you want to keep your cryptocurrency for an extended period, it’s best to move it off the exchange and into your wallet.
None of the information on this website is investment or financial advice and does not necessarily reflect the views of CryptoMode or the author. CryptoMode is not liable for any financial loss incurred by acting on information provided on this website by its authors or customers. Always conduct your research before making any financial commitments, especially with third-party reviews, presales, and other opportunities.