In this blog, we will discuss the risks associated with exchanges and the advantages of self-custodial wallets. We will also explore how security and control matter in cryptocurrency investing.

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Exchange Insolvency and Other Risks:

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One of the significant risks associated with exchanges is insolvency. Exchanges are centralized entities that hold the users’ assets and are vulnerable to hacks and attacks. In case of insolvency or bankruptcy, users’ assets are at risk of being lost or frozen. This risk was highlighted in the Mt. Gox hack in 2014, where the exchange lost 850,000 bitcoins, worth over $450 million at the time.

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In addition to insolvency, exchanges are also susceptible to hacks and attacks. In 2019, Binance, one of the world’s largest cryptocurrency exchanges, suffered a hack that resulted in the loss of over $40 million worth of cryptocurrencies.

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FTX Insolvency Highlights the Importance of Self-Custodial Wallets:

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In November 2021, FTX exchange faced insolvency due to the unexpected liquidation of a large trading account. While the exchange has stated that it will compensate affected users, the incident highlights the risks associated with centralized exchanges. The insolvency also underscores the importance of self-custodial wallets in safeguarding digital assets. Self-custodial wallets like Plena offer a more secure alternative to exchanges, ensuring that users’ assets are protected even in the event of exchange insolvency or bankruptcy.

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Why Security and Control Matter in Cryptocurrency Investing:

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Cryptocurrencies have become a popular investment option due to their potential for high returns. However, as with any investment, there are risks involved. By using a self-custodial wallet, investors can safeguard their digital assets and reduce the risk of losing their investments due to exchange insolvency or hacks.

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In addition to security, control is also essential in cryptocurrency investing. With self-custodial wallets, users have complete control over their digital assets, allowing them to manage their investments as they see fit. This means that they can buy, sell, and trade their assets without the need for a third-party to manage their funds. This control is especially important in the volatile cryptocurrency market, where quick decisions can make a significant impact on investment outcomes.

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Conclusion:

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Cryptocurrency investing has become popular due to its potential for high returns. However, with the rise in popularity, the risks associated with centralized exchanges have also increased. By using a self-custodial wallet, like Plena investors can safeguard their digital assets and reduce the risk of losing their investments due to exchange insolvency or hacks. With enhanced security, full control, privacy, portability, and accessibility, self-custodial wallets like Plena offer a secure and convenient option for managing digital assets, ensuring that investors can transact with peace of mind.

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