From the moment the first Bitcoin was mined in 2009, the crypto market has always been associated with volatility and uncertainty. In fact, it is this very quality that has been instrumental in creating a financial asset that has the power to make some people overnight billionaires while others have walked away with their fingers badly burned.
That is understood, but even by crypto’s own standards, the past year or so has been highly volatile. Crypto exchanges have borne the greatest brunt here, and there is a sense that the bigger they are, the harder they are apt to fall. The collapse of FTX last year was only the beginning, it seems, and over recent weeks there have been numerous adverse headlines relating to other exchanges, most notably Binance.
Are exchanges still safe? If so, under what circumstances, and if not, what other alternatives exist? As ever in the world of crypto, there are no certain answers to these questions, but we can certainly draw some tentative recommendations based on the information that is out there.
There are numerous crypto exchanges out there to choose from. Cautious investors tend to seek safety in numbers, and this has contributed to the dramatic rise of Binance. This is, after all, the exchange that had the might to bail out FTX but also the good sense to step back from doing so at the last moment. It was one player that came out of the whole debacle with a glowing reputation.
That has all changed in recent months, with the SEC investigation into Binance in the US coinciding with the exchange strategically withdrawing from certain European markets. Unlike FTX, where the first sniff of trouble prompted mass withdrawals, investors seem to have kept faith in Binance, and it is riding the waves successfully – so far.
Having said that, if you are looking for your first exchange, there is plenty of logic to seeking an alternative that is not dominating the headlines in this way for all the wrong reasons. The top exchanges all offer cutting-edge security and most of them carry less baggage than Binance and other top brands that are under the media spotlight.
Also, it is worth noting that Binance has got where it has by adopting something of a bullish growth strategy. If it rides the current waves, it will return to targeting smaller successful exchanges for acquisition. Those with holdings in the target companies often come out of these transactions with the biggest gains.Also read: Top 3 Lessons I Learned from Growing a $100K+ Business
Crypto pioneer Josh Graham recently commented that crypto exchanges defeat the object of crypto. He said “The whole point of crypto is that you don’t have to trust other people anymore. Crypto was designed to save us from this exact problem—these opaque systems where you don’t know what is being done with your money.”
So where does that place us regular men and women in the street? If we choose not to trust the exchanges where else can we place our Bitcoin and be confident that it will not only be safe but perhaps improve in value?
The obvious answer is to custody your own crypto assets. There’s a lot going for it, and it is more in keeping with the original cryptocurrency vision. It boils down to keeping your Bitcoin or altcoin assets in either a physical hardware wallet like a USB drive or alternatively, in an online software wallet.
Understandably, people tend to prefer the latter as it feels more appropriate to have your “safety deposit box” for crypto assets stored in cyberspace than thrown into a gadget that lies in your desk drawer. In both cases, you hold the real or virtual key and nobody else can get their hands on your belongings.
High-net-worth crypto investors can get nervous all on their own, and for them, professionally managed accounts are an interesting option. These are really no different in concept from self-custody but with the comfort of an agent who knows which wallets are best and takes care of everything on the investor’s behalf.
Ultimately, crypto remains as sound an investment as it ever was. Both exchanges and brokerages have their place for investors who do not wish to fly solo. But today, more than ever, transparency and trust are cornerstones for success.
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