Topic: Custodial accounts for bitcoin the more important than could have ever thought - page 2. (Read 285 times)

common advice for buying bitcoin is dont leave money the exchange, it could get hacked and stolen.

So here's how custoidal accounts work, you wire transfer money to the exchange and there is no withdrawal feature, the only option is to sell and wire transfer cash back to your bank account.

This means even if your coinbase account gets hacked, the hacker can not steal your money. It creates the same safety of a brokerage account for stocks. Only wire in and out.

Now, put yourself in the shoes of a multi-billion dollar investment fund. You want to place million dollar bids and wait for them to fill. But the common advice is dont keep money on a exchange. With a custoidal account its safe to keep on the exchange. This creates huge bid support and more liquid trading.


Custoidal accounts are what will take us to the trillion+ market cap


P.S. if a custoidal account wants to withdrawal bitcoin. Imagine they accumulate $1 billion worth of bitcoin and decide to withdrawal it. They can do it in a very secure way:
 1) create a non-custodial account and deposit $1 billion dollars
 2) place a sell limit order on the custodial account for $1 billion dollars *
 3) place a buy limit order on the new non-custoidal account for $1 billion dollars. *
 4) the matched orders sync up and securely transfer form one account to the other
 5) withdrawal the $1 billion dollars USD from the custodail account
 6) withdrawal the bitcoin from the new non-custodial account

*note it would likely not be a order on the open exchange, but instead a service the OTC desk offers behind the scenes, but you can see how this plays out. It is extremely safe to accumulate and with still allow withdrawals via this method even for billion dollar sizes.