Bitcoin was created to be owned by individuals without anyone else involved. You can keep Bitcoin secure, on your own. But you either own it, holding the keys yourself, or you don’t: it only becomes yours once its secured in a wallet that only you have access to – so don’t put too much trust in your exchange.
Exchanges are convenient on-ramps to buy Bitcoin, but bad places to store it. That’s because the exchange will keep ownership of any crypto you bought until you ask to withdraw it. All a company like Coinbase or Celsius can give you is a promise – one which they expect to break if they go bankrupt.
If you hold any amount of Bitcoin that you consider significant, you probably don’t want to lose it. Secure hardware wallets like Trezor offer an easy all-in-one environment to store crypto. You can even buy more direct to custody through the exchange comparison tool from Invity. No need to trust others to hold your crypto for you, stay safe with your coins in your custody from the moment you buy them.
Risks of using an exchange
If you’re just starting to save in Bitcoin, you might not be too worried about losing it, but even a tiny amount could be worth a lot one day. Make sure you know how to keep them safe for the long term.
Every day your money sits on a custodial exchange, there is a chance it could be lost forever. It’s not just bankruptcy that poses a threat; the infamous Mt. Gox exchange was hacked in 2014, and people who kept their funds there still haven’t managed to get access to them since.
Saving in Bitcoin should be assessed from a long-term perspective. Unless you have full control of your keys, your coins should be considered at risk. The collapse of a major custodian might not happen now, but the risk is constantly there. Avoid it by withdrawing coins regularly, or better yet, not having coins on an exchange in the first place!
How to withdraw your coins from an exchange
Each exchange has a different withdrawal process and charges different fees. To start, you will need a wallet that can create an address for the asset you want to withdraw. Software wallets can do this but are less secure than hardware wallets, which are specifically designed to keep keys safe offline.
Creating a secure address to withdraw to
Bitcoin is always stored on the blockchain. Your wallet creates keys controlling an address to which the Bitcoin can be sent when you withdraw. If you create those keys offline using a hardware wallet, you can be sure no one else copies them.
To generate a new address in your wallet:
- Go to your Bitcoin account and click on the Receive tab.
- Click on Show full address. Hardware wallets will also confirm the address on their screen.
- Copy the address to your clipboard and paste it into the Withdrawal address field shown on your exchange account. Confirm the characters match those shown in your wallet
Withdrawing from specific exchanges
If you need more guidance on how to withdraw your coins, most exchanges do have a guide documenting the process. Check out some of them below:
- How to withdraw from Binance
- How to withdraw from Coinbase
- How to withdraw from Kraken
- How to withdraw from Gemini
The price of custody
To try to discourage people from taking back control of their coins, exchanges tend to charge a lot more than they should for withdrawals. Some fees are expected due to the nature of cryptocurrencies, where users pay block producers to move coins, but fees charged by exchanges can be many times higher.
You may be tempted to wait and keep fees down by withdrawing all at once, but the longer your coins sit on the exchange, the greater the risk. The best way to stack for long-term savings, and avoid excessive withdrawal fees, is by buying direct to your wallet from non-custodial exchanges.
Bitcoin lets us truly own our money again. Don’t feel the need to hand control over to a third party that promises to keep them safe. Securing Bitcoin may feel different from what you’re used to, but it is simple and safer to secure it yourself. Get started easily and take control with a hardware wallet.
