Should you keep your coins on an exchange or go full self custody? If you ask crypto Twitter, the answer is always "self custody everything, no exceptions." If you ask your mom, the answer is "whatever is easiest."
The real answer? It's more nuanced than either camp wants to admit.
The exchange vs self custody debate is the oldest argument in crypto. And like most old arguments, both sides are partially right and partially delusional. It depends entirely on who you are, how much crypto you hold, and what your actual risk tolerance looks like in practice (not theory).
The Case for Exchanges
Exchanges aren't the evil boogeyman that crypto purists make them out to be. For many people, they're actually the safer option. Think about it:
- Recovery path if you lose your credentials (try forgetting your seed phrase and see how that goes)
- Insurance on hot wallet assets (many top exchanges carry policies)
- Easy tax reporting and complete transaction history at the click of a button
- Instant liquidity when you need to move fast
- Professional grade security teams monitoring 24/7 (you don't have a security team)
The uncomfortable truth is that more crypto has been lost to self custody mistakes (lost seed phrases, corrupted drives, house fires) than to exchange hacks combined. For people who aren't technically skilled, an exchange is genuinely safer than a hardware wallet sitting in a drawer they barely understand.
The Case for Self Custody
But here's where the exchange story gets ugly fast:
- True ownership. No third party can decide your money isn't actually your money.
- Can't be frozen or seized without your physical cooperation (governments have seized exchange funds)
- Zero counterparty risk. If the exchange goes bankrupt (FTX, anyone?) your coins are gone
- Privacy from surveillance and data collection (exchanges report everything to tax authorities)
- No withdrawal limits, no KYC delays, no "your account is under review" nightmares
FTX alone wiped out $8 billion of customer funds overnight. Celsius froze withdrawals with zero warning. Mt. Gox took 10 years to partially reimburse victims. If you're holding serious money, the counterparty risk of an exchange is a legitimate existential threat.
The Roylith Answer
The answer is: both, in the right proportions. This isn't a cop out. It's risk management.
Keep your trading stack and emergency liquidity on a reputable exchange like Roylith. This is money you need to move quickly. Keep your long term wealth in self custody (hardware wallet, air gapped). This is money that doesn't need to move for months or years.
The exact split depends on your situation, but a solid starting point: 20% on exchange (trading/liquidity), 80% in self custody (long term holdings). Adjust based on how actively you trade and how comfortable you are with hardware wallet security.
