Crypto Storage and the Great Currency Exchange Fiasco

by Kaitlyn Ranze

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

Types of cryptocurrency storage: hot versus cold storage

Hot storage refers to keeping your cryptocurrency stored 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 offline methods of storing your cryptocurrency, such as on 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 own pros and cons, and which one is best for you depends on your own personal circumstances. Most experts recommend using a combination of both hot and cold storage. This way, you can enjoy the convenience of hot storage while still 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 that you can easily buy, sell, or trade your cryptocurrency without having to worry about the technical details.
  • Secure: Cryptocurrency exchanges are usually very security-conscious, as they handle large amounts of money. This means that your funds are likely to be safe on an exchange, even if the exchange itself 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. This means that if an exchange is hacked, your funds could be at risk.
  • Fee-heavy: Cryptocurrency exchanges usually charge fees for each transaction. This means that if you’re frequently buying and selling cryptocurrency, the fees can add up.
  • Less private: Cryptocurrency exchanges are not anonymous, and they usually require you to provide some 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 freezing 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 been forced to take measures to protect their assets. One of these measures is freezing withdrawals.

When an exchange freezes assets, it means that they are not available for trading or withdrawal. This can be a temporary measure to protect the exchange from losses, or it can be a permanent measure to prevent users from withdrawing funds that 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: When the markets are volatile, exchanges can lose a lot of money if they don’t take measures to protect themselves. One of these measures is freezing assets. By freezing assets, exchanges can make sure that 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 that they don’t have, it can put the exchange at risk. To prevent this from happening, exchanges will often freeze assets. This way, they can make sure 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, if an exchange is operating in a country that has strict anti-money laundering laws, it may need to freeze assets to make sure that it isn’t being used for illegal activity.

4. To protect against fraud: If an exchange suspects that someone is trying to fraudulently withdraw funds, it may freeze their assets to prevent them from doing so.

5. To protect the user: In some cases, an exchange may freeze a user’s assets to protect them from themselves. For example, if a user is trying to withdraw funds that they don’t have, the exchange may freeze their assets to prevent them from losing money.

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

What about when a crypto exchange files for bankruptcy?

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

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

However, the company has now filed for bankruptcy in the United States, citing debts of over $50 million. This means that 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 it is possible that they could 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 cryptoexchange bankruptcies

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

Voyager was founded in 2018 with the goal of becoming 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, it was hit with a class action lawsuit alleging that it had misled investors about its fees. The company was also sued by the Securities and Exchange Commission (SEC) 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 of 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. Afterall, 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 it is constantly being improved upon by a community of developers. 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 a number of 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 begin to 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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