Topic: Events made you scare about custodial wallets, centralized exchanges. (Read 319 times)

He is indeed lucky, but he is really pushing it as despite having money stuck on FTX, he still has decent amount of money on Binance and Coinbase. So in the end he didn't learn much so the same thing might happen all over again.

I have never had a problem with CEXs but I have seen and heard things from people around me and close to me so I know better. I have always been against keeping my money in centralized exchanges and I always make sure my friends know this.


This was the email someone I know received from Bybit after the coins had been frozen. there was no opportunity to plead the case, they didn't even want to hear her out, nothing. The money is just gone. There was the usual back and forth and at a point they stopped replying. This is like sentencing a person without a hearing. There was over $3k in the exchange wallet.

I understand the security and the regulations that they have and that is even a reason why you shouldn't keep your money there. treat it as a marketplace if you must but always make sure you move your funds to a non-custodial wallet where you have total control of everything.

118 percent really is something.  If I was a victim of FTX I would not even hope for a single Penny to be recovered for me.  18 percent is something a lot of people miss on in Trading and Investing due to bad mistakes.  Your friend is lucky as hell.

Interesting, I didn't think about it with 118% money back if FTX victims had their fund at that collapse moment in stablecoin.

Hopefully no people will try to take risk with centralized exchanges, their own money and hope an exchange collapses, bankrupts and wait for 118% compensation from the exchange. It is far than an impossible dream while most of times, dream won't come but nightmare knock their doors.

Some may even profit, but only in USDT.

I have a friend who had a decent amount of stablecoin on FTX that he used for trading (at the moment of collapseall of his crypto was in stablecoin) so in the end he will get 118% of the money back. Having said that, if he used that stablecoin to buy bitcoin, he would profit much more.

This is what they use to allure gullible people to deposit their money into their platform and leave it there for interest sake. Exchanges, just like traditional banks work with fractional reserve, so any deposit into their platform is put into other investments by the exchange and the customers will pay the price should anything go amiss.
For those who cannot completely boycott centralized exchanges, they should use it only for trading and not for keeping their assets.

This is possible that they're doing that to attract more deposits come in to them so that they'll use that for something else, maybe as a reserve until the stake is done.

Or, they'd use that to leverage and make more money for trading and eating other traders alive.

Exchanges are a business and this has been the hot issues with Binance and as well as the other known ones like FTX that have misused people's deposits.

The rate at which staking rewards and high interest savings rewards are being advertised on exchange, I can only assume that they're running out of people money to use for their business and now trying to get new deposit.

Custodial wallet and exchange are just like our regular banks and I don't get why we're trying to leave the norm we know with our financial system and yet we still fall for the same tricks in the crypto industry.

Your funds are never safe with custodial wallets or exchange. You'll think they're until you get restricted because of some stupid reasons that you know nothing about.

Custodial wallets and exchange all have one thing I'm common and that's, they'll eventually get hacked or collapsed sooner than you can think so if you think you can get your funds off the exchange or wallet before they collapse, you're mistaken, boycotting them is the only way you can protect your funds.

I can understand their frustrations, particularly those customers who were hodling assets that have appreciated in price since FTX collapsed, but it is what it is, and they have to accept the decision. The news didn't state exactly when they would start the repayment, but  victims can be lucky that the issue of repayment only lasted 2 years and that they are going to get the U.S dollar value of their money back, customers of mt.gox had to wait nearly 10 years before they were able to get some of their funds back.

You will still be subject to the withdrawal fees of a centralized exchange if you use it to purchase bitcoin and then you immediately move the coins from their hands and into a non-custodial wallet. Therefore, the warning should be extended to not using CEXs at all. They have arbitrary rules, unfair terms, and can request, store, and share your personal information with any of their partners or be hacked and have it all leak onto the darknet. 

They should be scared, unfortunately..... Some don't care. !

Custodial means trusting someone else with your assets and that my friend is a very bad thing to do, I've never seen a company or business been the same ever again since the real owner isn't around anymore, Binance is a good example, today any shit coin can get listed on binance, it is no more under CZ control, this is just a plus though.

Bank to custodial, every centralised entities are bad ideas if truly you want control, but ive meet people who want to be controlled, they always want someone to do everything for them, these types of people are the reasons why centralized power will keep growing.

No one can keep your money safe than you, even banks use customers fund at their back for personal gains, especially money locked in fixed accounts, and millions of people don't even know, I hope more people have the calmness to learn the difference.

Honestly.  I get their frustration but I would consider myself lucky if I got even part of the Funds back.  Like you say, most bankruptcy or Scam victims are never even refunded at all.  In between receiving nothing at all and the ideal outcome of receiving all the Money back, the only remaining option is to receive part of what you had.

For a few people, this may be a very expensive lesson.  Most people have probably learned little if any thin at all after this.  You learn the fastest when it costs you the most.

FTX Will Return $16 Billion to Customers Following Court's Bankruptcy Approval.

It's a latest news about FTX exchange and how they will compensate their victims with latest $16B recovered.

FTX victims are very lucky because they did not lose all money after a FTX bankruptcy. In many other exchange collapses, users lost all money, no compensation.

In the article, you can see upset and complains of FTX victims too.

It's one more reason to avoid a risky practice of storing your cryptocurrencies on centralized exchanges.

I think there is more to be corrected from the OP thread title, the title does not carry the image of what is in the contents, to me now, am seeing this as a collection of threads on series of events that have happened whereby users can learn or know on the reason, why they should take their assets from centralized exchanges, he has given some helpful links serving as reference already, but more is still needed to be done on the topic construction because it is not reflecting or projecting well about what the content carries.

I'm glad that from the beginning of my crypto journey i've never considered using centralized exchanges as wallets, they are platforms for trading, that's if you want to buy or sell crypto. I know they try to allure people to keep their coins in their platform, but don't fall for it, it is not worth it, CZ even went as far as saying that more people will lose their coins in non-custodial wallets than in exchanges, the goal is for people to keep their money in their exchange, so they can use it to make more money for themselves.

There has never been an expectation of privacy when using custodial services. If you are using them it should only be to buy or sell cryptocurrency, but it shouldn’t be treated as a wallet or a bank where you can leave your money for long periods of time.

The FTX collapse is proof that even the most reputable exchanges are not safe. Binance might be the most popular exchange today but it has been facing legal pressure which makes me worried they can be shut down at any time. It might not affect me directly but it can have a domino effect that will impact many businesses.

Self-custody and decentralization are increasingly becoming greater priorities. Anyone trying to promote custodial solutions as an acceptable tradeoff, such as centralized yield earning platforms, should be seen with skepticism.

I Can Simply relate to this kind of moment, I think I have ever experienced same thing with my password for login getting mixed next was the get a new password button pressed it and the warning of disabling any withdrawals or any P2P transactions was issued to me and without much more other way to go about it I simply just allow it and that’s how i frustratingly couldn’t spent my own money but I will say it was actually a very good security feature they added considering how easy people can get their devices stolen or scammer can get access easily to your account and transfer off funds. But once you actually get this 24 hours ultimatum you can simply take action before they take your funds off the exchange, so it is a good security strategy for a cent


This reason here is why even all this SAFU, proof reserve funds by many centralized exchanges do not move me or make them exciting. Even if we agree that this exchanges have extra funds set aside should either an hack or anything shutdown occurs I will say the exchanges can not simply distribute the tokens immediately and if they actually took time then coin might have had a new value then most of which would have lost its value. So all this reserve funds aren’t moving me towards the idea funds centralized exchanges

The worse one I think is if the exchange got shutdown by Government due to some cases. There are lots of users affected with this kind of process like the ftx downfall which leave some users penny less since they are bankrupt. Also their token goes down that badly. Leaving funds on cex is okay as long as you use that for trading and when not in use withdraw it or transfer to non custodial for safety purposes.

And things are about to get worse.  Not only for Bitcoin but for Privacy generally.  There is a really strong fight for leaving us all with no Privacy coming from the Governments, so this is a time where Tor, Bitcoin, Monero and other such Privacy solutions are more important than ever before.

The people used to have control over about every thing they owned.  But now you barely get to own any legitimate, real rights and have control over your own stuff.  Start from the bottom and see for yourself.  Purchase an Android device and try setting it up with maximized Privacy.  You will have pretty much none, even with all Privacy options turned on.  Compare this to how dumb phones used to be.  Power it on, choose the preferred language, enter the SIM and you are ready to go.

I really wish we had such options nowadays again.

Some main risks are: fund security, personal privacy, and expensive cost of withdrawals.

The first risk is vital as you never want to lose your fund one way or another. By storing your fund directly on centralized platform, you don't have private keys, don't own your coins, and you have risk of losing it anytime.

The second risk is privacy as using centralized platforms nowadays mostly means KYC, that is not good for privacy.

Why KYC is extremely dangerous – and useless

The last risk is withdrawal fee that is very expensive if you submit a withdrawal on centralized platform. If you use a non custodial wallet, with coin control feature, you are free to choose a more affordable fee rate for your transaction.