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Nov 094 min read

Don't Keep Your Bitcoin On Exchanges.

Don’t Trust The Crypto Exchanges

Have you looked at the crypto market over the last 24 hours? It has been absolute mayhem. One of the largest crypto exchanges in the country, FTX, is insolvent after investors discovered that Alameda Research, a close affiliate of FTX, had most of its assets as illiquid FTT tokens issued by the exchange itself. Alameda Research was using these illiquid tokens as collateral for massive loans.

After word got out that this was the case, this essentially started a bank run on the exchange. $5 billion in withdrawals occurred on the FTX exchanges on Sunday alone. The beleaguered exchange is looking for $8 billion in emergency financing to ensure its customers are made whole. This probably isn't going to happen.

Rival crypto exchange Binance considered buying FTX earlier this week but decided to walk away after taking a look at their books.

Without a bailout from deep-pocketed investors, FTX will likely go under with all their depositor's funds. They will be lucky if they get pennies back on the dollar.

I genuinely feel bad for the people who trusted FTX and got burned. This is just another example of why you should not trust any entity to hold your Bitcoin. You don't know what they are doing behind the scenes.

A common adage in Bitcoin of "not your keys, not your coin" applies here. If something is not in your possession, you don't truly own it.

The only way to keep your Bitcoin safe is to self-custody it yourself. By holding your own Bitcoin, you can ensure that your Bitcoin is yours and is protected the way you want it to be.

If you buy your Bitcoin on an exchange such as Coinbase or Kranken, make it a habit to send your Bitcoin to your cold storage solution after purchase. This will ensure that it is in your possession.

Any Bitcoin purchased on an exchange and left on the exchange is not Bitcoin; it is an IOU. The last thing you want to do in a crisis is beg an exchange to let you withdraw your funds when you need it most.

Cold Storage Is The Way

Plenty of software and hardware solutions can help you secure your Bitcoin. Here is a list of solid hard wallet solutions that you should look into. Each has its pros and cons.

Keystone Wallet

Ledger Wallet

Coldcard

Trezor

Keepkey

If you would like a deeper understanding of why you should custody your Bitcoin, check out my article on the importance of self-custody.

Self-Custody Your Bitcoin

Incidents like this will keep happening until people understand that exchanges can't be trusted and that there is a difference between BITCOIN and CRYPTOS.

Bitcoin is a commodity with no counterparty risk. You can hold it without worrying that someone will run off with it. Cryptos have significant counterparty risk.

According to a recent federal court case involving the crypto-powered content-sharing platform LBRY, cryptos such as Ethereum, LBC, and Shiba Inu are unregulated securities. Holding these assets exposes you to regulatory risk.

The federal government will go after the crypto exchanges such as Coinbase and Binance to make them abide by the same laws as stocks. This will end up killing these exchanges and sending the price of many crypto assets to zero.

The only digital asset that will stand the test of time is Bitcoin. It's decentralized; has no company issuing tokens and no CEO of Bitcoin. It's an open-source monetary protocol. That's it. That's the innovation. If you understand this, understanding Bitcoin becomes much easier.

If you are ready to start your journey down the Bitcoin rabbit hole, I highly recommend reading these books.

The Bitcoin Standard by Saifedean Ammous

The Price of Tomorrow by Jeff Booth

The Sovereign Individual by James Dale Davidson and William Rees Mogg

These books will give you a solid foundation about the Bitcoin thesis and what it solves. The current market will test your conviction, and having these books on hand will help you stay grounded and accumulate more Bitcoin during downtimes when everyone else is running scared.

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Bitcoin address: bc1q2sy7thucye5qphpr4upz34l99yl5m33ggrtjdl

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