You should consider moving your crypto off exchanges and onto a hardware wallet (known as cold storage). Why? Storing cryptocurrency (such a bitcoin or ethereum) on a centralized exchange like Coinbase, BlockFi, Binance and others may be convenient, but it’s riskier by the day. In 2022 we have seen some of the major exchanges file for bankruptcy including FTX, Celsius, and BlockFi (where I previously held some crypto to earn interest and used their Bitcoin rewards credit card).
The downside to crypto exchanges
When you buy through Binance, Celsius, Coinbase, or other custodial exchanges, they are free to use your money as they wish. Until you withdraw to self-custody (e.g. cold storage in your own wallet), there is no guarantee that they ever even hold the assets that you paid for, while they could be using your funds to buy high-risk assets or invest in sketchy protocols to try to turn a profit before you decide to withdraw… –Trezor Blog
I bought the Trezor wallet in July 2022 and had most of my assets transferred by late August after doing several small tests.
If you’re curious about how to withdraw from a crypto exchange into a hardware wallet but feel overwhelmed by the massive amounts of information, watch my guided Trezor wallet setup video below.
Cold Storage Wallet Setup and Transfer
Trezor Model T Wallet Setup video below covers:
- Trezor Model T wallet setup (first time user: hardware wallet and Trezor Suite desktop software)
- How to transfer crypto from an exchange (I demo moving Bitcoin from BlockFi to Trezor)
- Safe places to buy the wallet (either Trezor website or Trezor’s verified Amazon storefront here)
Crypto Exchange Bankruptcy and Freezing Assets
Earlier this month (November 2022), FTX filed for bankruptcy and CEO Sam Bankman-Fried (SBF) resigned in a collosal mess of mismanagement that has gut punched the crypto markets. FTX’s failure has had a ricochet effect across many exchanges and funds. Smaller exchange BlockFi has frozen withdrawals, with billions in investor assets locked (because the company was so leveraged).
Before that, on June 13, 2022 global crypto lender Celsius stopped all withdrawals across its network, freezing $12 billion in investor money through the move. As of this writing (November 22, 2022) this is still not resolved:
The fate of customers and their deposits is one of the biggest unanswered questions in the Celsius case. And amateurs being last in line to get repaid, behind pros backed by an army of lawyers and bankers, is not exactly an unfamiliar story in bankruptcies. – Celsius’ Crypto Customers Face Big Obstacle in Trying to Claw Back Their Deposits – Coindesk 10/5/2022
More platforms like Finblox and Babel Finance followed suit (though certainly not all). Eight years after the infamous 2014 Mt. Gox hack in which 850,000 Bitcoin were stolen, that is still unresolved.
Bitcoin was meant to be a decentralized asset. Now you can buy it in Venmo.
If you want true control of your crypto, you can’t trust it on an exchange which could freeze at any time.
Why should you look into cold storage?
A series of events in 2022 have been labeled a crypto rout. Read more and watch my video about the 2022 crypto fallout and exchange issues here. In short, many of the major exchanges and crypto funds turned out to be mostly illiquid and have since frozen billions in investor assets.
What is a cryptocurrency exchange?
A cryptocurrency exchange, or a digital currency exchange (DCE), “is a platform for buying and selling cryptocurrencies. In addition to trading services, crypto exchanges also offer price discovery through trading activity, as well as storage for crypto.
Before crypto exchanges, people were only able to acquire crypto through mining or by organizing transactions in various online and offline forums. Today, there are hundreds of crypto exchanges offering an array of digital assets and varying levels of security and associated fees. It’s up to you to find the exchange and digital assets that suit your particular needs, price range, and security expectations.” –Gemini
Popular crypto exchanges:
“Some brokerages which also focus on other assets such as stocks, like Robinhood and eToro, let users purchase but not withdraw cryptocurrencies to cryptocurrency wallets. Dedicated cryptocurrency exchanges such as Binance, Coinbase, and BlockFi do allow cryptocurrency withdrawals however.” –Wikipedia
Factors to consider:
“When choosing a cryptocurrency exchange, it’s important to look at factors such as supported assets, fees, payment methods, and security. We considered these factors when selecting this list of the best cryptocurrency exchanges.” –Investopedia
