How many times do we have to see this?
I was actually getting ready to write a portfolio update when I saw this headline and I got derailed. This is part of the problem in crypto, when you don't hold the keys, do don't actually control the assets.
I overhead someone the other day mention no one really owns crytpo - they just happen to be the only person(s) who control the key to access it. If more than one person has the key, then it can be moved and there is no one to help you regain access or control to your crypto. You don't control crypto - you are really controlling knowledge, and that knowledge controls wealth.
Typically this risk was more focused on those exchanges that may not have been as trust worthy as the bigger more established names. There are plenty of historical names we can all think of where the end users lost access to their property. But now, it appears authorities are just locking accounts and holdings within an exchange to get their cut.
Governments Are Getting Smarter
AT first they ignored us, then they mocked us... now they are joining us and trying to implement their taxation and control back over us. It starts small, only the biggest users, and then moves on down the line sweeping up ever smaller pieces.
Politics, and personal beliefs aside, this is the reality we all have to deal with when operating in the space. No matter if you choose avoidance, evasion, or ignorance leaving money sitting on an exchange is becoming risker everyday.
Centralized Exchanges will work with governments, they are run by people, and people don't want to go to jail. It won't take many threats of being jailed before they turn over your information.
Liquidity Problems.
If we all kept all our crypto off the exchanges, then we have massive liquidity problems, and getting matched with a seller becomes more and more of an issue. This will likely be fixed with institutional money as it starts to flow in, but not the direction I prefer.
The Solution? Decentralized Exchanges (DEX) Where You Control The Keys.
New DEX solutions like Poliarity.Exchange are coming up and providing new solutions. these DEX exchanges not only are decentralized, but you maintain your control over your funds. They can't be seized, or stolen. Back to rule #1, Your Keys, You Assets!!!
DEX exchanges will offer other advantages, such as less KYC, less sharing of personal information with who knows on the other end, and assets you might need a VPN for. There is a lot of money in running an exchange, look at the recent COIN IPO. Money and Profit will breed competition, DEX is the new tech, while COIN is already the old news.
How Much Are You Willing To Risk On An Exchange?
I only move funds to an exchange to trade, or keep small enough balances there to buy something quick. These funds are minimal to my overall balance and while it would suck to lose them, it wouldn't change my numbers much at all.
I will be looking for new platforms for 2021, and while I may not like many stable coins, if that is what it takes to run on a DEX, it might be worth giving it a shot.
sincerely,
This post NOT financial advise, it contains my personal opinion and experience and is intended for educational purposes. Perform your own research and analysis prior to making investment decisions.