Banks are a reliable option in the financial sphere for people. Consumers have a huge amount of trust in the banking systems. You will have trust in the banks because you may know well that your money is secured with the institutions. Big Money Rush is a great trading platform to check out if you’re just starting in the world of cryptocurrencies.
The banking institutions will provide insurance against any situations of theft or losses. If we look at a situation where even banks collapse, you will get your money. All these factors have developed a deep trust in the minds of users. And, with this, banks are holding an influential position in the financial market.
But, the Crypto market lacks this aspect. Though the number of investors in Crypto is increasing now, people are still skeptical about it. Crypto users have faith in the exchanges. These firms let you sell and buy digital currencies.
Are Crypto Exchanges Equal To Banks In Performance?
The trust in banks has created an issue for the Crypto exchanges. But, for Crypto trading and investment purposes, exchanges have an important role. These firms are the perfect solution for every investor.
After joining an exchange, you will have to create an account with the same. After that, the exchange will provide you with a digital wallet. This wallet will help you in buying Cryptocurrencies and it will show the number of funds present in it.
It works pretty similarly to a bank. And, you can choose to withdraw the funds and exchange them for Cryptocurrencies. In some Cryptocurrency exchanges, you will also get a debit card. With this card, you will be able to buy things in different physical stores. And the payments will be in Crypto!
If you are thinking that your Cryptocurrency exchange is similar to a traditional bank, you are correct to a certain extent. But that’s not the complete truth!
Cryptocurrency exchanges do not have similar user trust as that banks. Because your funds with an exchange are not secured and are prone to lose. If the exchange faces loss or thefts of any kind, you will have to face the impacts too! The Cryptocurrency exchange’s loss will mean your financial loss.
What Does The Case Of FTX Reveal?
One of the Crypto giants, FTX, faced a huge collapse at the beginning of November this year. With the crash, customers were prevented from withdrawing their funds, leaving them in distress! Experts call the situation a “liquidity crisis”.
The depositors of this exchange owe around 8 billion USD. And, most of the users are left behind with very little hope. It seems that they are hardly going to revive their lost funds!
We can see the story of William, who lost a heavy amount in the FTX collapse. In an interview with The Guardian, he says that, on 8th November, he woke up with a warning message about issues in the firm. He had over 85,000 USD of fiats in the exchange’s wallet.
Also, he stored BTC worth about 55,000 USD and an extra 10,000 USD worth of different tokens. When he received the message, it was too late to withdraw everything. Also, there was a limit of withdrawals to 25,000 USD! Every time he wanted to withdraw, he would get an error message.
At present, William owes over 60,000 USD with very minimal chances of recovery. He could have prevented such a worse situation if stored all the funds in the non-custodial wallet! The user has full control over this type of wallet and you can store the private key.
How To Take Control Of The Situation?
With a non-custodial wallet, you have control over your funds. But, most of the time, people find it hard to maintain and think that they might lose their private keys. They believe in the custodial wallets of the exchanges and store their funds in those wallets.
But, an exchange can never be your bank. It is secured and your funds will not be insured. Though they seem appealing, having a non-custodial wallet will bring control to your hands.
Non-custodial wallets are the best way to secure your funds and Cryptocurrencies in the Crypto space. Maintain the private keys properly and you are secured from the hassles that your exchanges may face.