Most new entrants into crypto make the rookie mistake of storing all their altcoins on their cryptocurrency exchange. But this is bad idea. Granted, you may need the altcoins there if you are using them to trade but once you have taken your profits from your active trades, it is always a good idea not to leave the altcoins on the exchange. Even though your exchange has an inbuilt wallet for storing your coins, it doesn’t make it a wallet. By definition, a cryptocurrency exchange is a platform for trading cryptocurrencies. This means that the only coins that should remain there are the ones being traded.
Here are two main reasons why it is very risky to store your coins on your cryptocurrency exchange:
Private keys and security
You do not own the private keys of the wallet provided by your cryptocurrency exchange. Now, if you do not own the private keys to a wallet, you really do not own the wallet either. As we have seen in the past, exchanges can be hacked. If that were to happen, you could lose all your altcoins. The rule of thumb is, it’s always better to be safe than to be sorry.
Regulation and insurance
Have you ever thought of why you trust your bank with your fiat? Well, the only reason you trust the bank with your money is because banks are under some stringent regulations that kind of guarantee your fiat’s safety. But unlike banks, cryptocurrencies are unregulated and uninsured. So just to be super safe, it is better not to hold all your coins there.
Instead of storing your altcoins on your cryptocurrency exchange, it is more prudent to use a different wallet for them. In addition, take some precautionary steps to safeguard the cryptos you have in your exchange for trading. At a bare minimum, ensure you have enabled 2-factor authentication.