Crypto Storage and the Great Currency Exchange Fiasco

When it comes to storing your cryptocurrency, you have a few options. You can keep it in a wallet on your computer or phone, store it on a USB drive or other offline storage device, or entrust it to a cryptocurrency exchange.

Types of cryptocurrency storage: hot versus cold storage

Hot storage refers to storing your cryptocurrency on an exchange or online wallet. The main advantage of hot storage is that it’s convenient. You can quickly and easily buy, sell, or trade your cryptocurrency. However, it’s also less secure than cold storage and is more susceptible to hacking.

Cold storage refers to storing your cryptocurrency offline using a USB drive or wallet. The main advantage of cold storage is that it’s much more secure than hot storage, as it’s not connected to the internet and therefore less vulnerable to hacking. However, the same things that make it more secure also make it harder to sell, buy, and transfer.

Each option has its pros and cons, and which one is best for you depends on your circumstances. Most experts recommend using a combination of both hot and cold storage. This way, you can enjoy the convenience of hot storage while keeping your cryptocurrency safe and secure.

But what do the types of storage have to do with the downturn in crypto values?

Let’s take a deeper look at the pros and cons of storing your cryptocurrency on an exchange:

PROS

  • Convenient: Cryptocurrency exchanges are designed to be as user-friendly as possible. This means you can easily buy, sell, or trade your cryptocurrency without worrying about the technical details.
  • Secure: Cryptocurrency exchanges are usually very security-conscious, as they handle large amounts of money. Your funds are likely safe on an exchange, even if the exchange is hacked.
  • Liquid: Cryptocurrency exchanges are one of the most liquid markets for buying and selling cryptocurrency. This means that you can usually convert your cryptocurrency into cash very easily.

CONS

  • Hackable: Although exchanges are generally quite secure, they are still susceptible to hacking. As we pointed out in this article, cybercrimes outpace robberies. Your funds could be at risk if an exchange is hacked.
  • Fee-heavy: Cryptocurrency exchanges usually charge fees for each transaction. The costs can add up if you’re frequently buying and selling cryptocurrency.
  • Less private: Cryptocurrency exchanges are not anonymous and usually require you to provide personal information when you sign up. This means that your transactions on an exchange are not as private as they would be if you were using a wallet or other storage method.

But what about how Celsius and other currency exchanges freeze accounts?

It’s no secret that cryptocurrency exchanges have been under immense pressure lately. With the recent influx of new users and the volatility of the markets, many exchanges have taken measures to protect their assets. One of these measures is freezing withdrawals.

When an exchange freezes assets, they are not available for trading or withdrawal. This can be a temporary measure to protect the exchange from losses or a permanent effort to prevent users from withdrawing funds they do not have.

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There are many reasons why exchanges might freeze assets.

Some of these reasons include:

1. To protect the exchange from losses

Exchanges can lose a lot of money if they don’t take measures to protect themselves when the markets are volatile. One of these measures is freezing assets. By freezing assets, exchanges can ensure they don’t lose more money than they have to.

2. To prevent users from withdrawing funds that they don’t have

If an exchange allows users to withdraw funds they don’t have, it can put the exchange at risk. Exchanges will often freeze assets to prevent this from happening. This way, they can ensure that all of the funds on the exchange are real and can’t be withdrawn by users who don’t have them.

3. To comply with regulations

In some cases, exchanges may need to freeze assets to comply with regulations. For example, suppose an exchange operates in a country with strict anti-money laundering laws. In that case, it may need to freeze assets to ensure that the business isn’t being used for illegal activity.

4. To protect against fraud

If an exchange suspects someone is trying to withdraw funds fraudulently, it may freeze their assets to prevent them from doing so.

5. To protect the user

An exchange may sometimes freeze a user’s assets to protect them from themselves. For example, if a user is trying to withdraw funds they don’t have, the exchange may freeze their assets to prevent them from losing money.

While there are many reasons exchanges might freeze assets, it’s important to remember that this is not always bad. In some cases, it may be necessary to take this action. However, if you’re ever concerned about frozen assets, you should consider storing your cryptocurrencies in a crypto wallet.

What about when a crypto exchange files for bankruptcy?

The cryptocurrency exchange Celsius filed for Chapter 11 bankruptcy on July 13, 2022, leaving many of its users wondering what would happen to their assets.

Celsius is a digital currency exchange that allows users to buy and sell cryptocurrencies. The company has been operating since 2014 and has built a large user base.

However, the company has now filed for bankruptcy in the United States, citing debts of over $50 million. This means the company will be liquidated and its assets sold off to pay creditors.

This could have serious implications for users of the exchange, who may not be able to access their funds. It is unclear at this stage what will happen to user balances, but they may be lost entirely.

This is a developing story, and more information will be released in the coming days. In the meantime, users of the Celsius exchange should monitor the situation closely.

Previous crypto exchange bankruptcies

On February 16, 2021, cryptocurrency brokerage Voyager filed for bankruptcy in the United States. This filing came after a tumultuous year for the company, embroiled in multiple lawsuits and struggling to attract new users.

Voyager was founded in 2018 to become a one-stop shop for cryptocurrency investing. It offered commission-free trading of a variety of cryptocurrencies, as well as staking and interest-bearing accounts. The company was initially quite successful, raising over $60 million from investors and attracting over 200,000 users.

However, Voyager soon ran into trouble. In 2019, a class action lawsuit alleged that Voyager had misled investors about its fees. The Securities and Exchange Commission (SEC) also sued the company for allegedly operating an unlicensed securities exchange.

These lawsuits took a toll on Voyager’s business, and the company struggled to attract new users. In 2020, it laid off a third of its staff and shuttered its Canadian operations.

But what happened to the assets of its users?

Well, they’re still working on it. “Customers will receive a combination of the following, with the ability to select the proportion of crypto and common equity they receive, subject to certain maximum thresholds: pro-rata share of crypto; pro-rata share of proceeds from the 3AC recovery; pro-rata share of common shares in the newly reorganized company and pro-rata share of existing Voyager tokens.”

Voyager Clarifies Deposit in Update

Should you even continue investing in crypto?

Here’s a question for you: why do you want to invest?

Is it because you believe in the technology? Is it because the blockchain, with its distributed ledger and tamper-proof architecture, has the potential to revolutionize how we interact with the digital world?

Or is it because you believe in the value of the tokens? After all, Bitcoin had a tremendous run-up in price.

There’s no wrong answer here. But if you had to choose one reason to keep investing in crypto, belief in the technology should be it. After all, we’ve seen how volatile the crypto market is.

Here’s what experts have said about cryptocurrency:

1. The technology is still in its early stages.

The potential applications of blockchain technology are still being discovered. We are only beginning to scratch the surface of what this technology can do.

2. The technology is still evolving.

The blockchain is an open-source technology, which means that a community of developers is constantly improving upon it. New applications and use cases are being discovered all the time.

3. The technology has real-world applications.

Blockchain technology is already being used in several industries, from supply chain management to banking. And as more and more businesses begin to adopt the technology, we will see even more real-world applications.

4. The technology is here to stay.

There is no doubt that blockchain technology is here to stay. It has too much potential to be ignored. And as more people realize this, the price of crypto assets will continue to rise.

So, if you’re still wondering whether or not you should keep investing in crypto, the answer is clear: believe in the technology. It is the future.

Related Reads:

Why You’re More Susceptible to a Con than You Think

Understanding Crypto Basics

Buying Crypto for the First Time

Where to Get Your Crypto News

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