CeFi Exchanges vs DeFi Wallets: Limiting your exposure to risk.
DeFi

CeFi Exchanges vs DeFi Wallets: Limiting your exposure to risk.

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2 years ago

CeFi Exchanges vs DeFi Wallets: Limiting your exposure to risk.

As the fallout from the collapse of the FTX exchange continues to send shockwaves across the cryptocurrency market, we are once again reminded of the risks involved in entrusting your entire crypto portfolio to centralised, unchecked, and often unregulated cryptocurrency exchanges.

Alarmingly, whilst the actions of leadership at FTX seem to have been shockingly reckless, entirely avoidable, and arguably downright criminal, their risk management and misuse of customer funds are not unique to them alone.

I was horrified to hear of investors losing their entire life savings in the collapse of just one exchange. It leaves the question; did they understand the risks? It seems evident they did not. Now, for those of you who do not know me or are unaware of the StrikeX eco-system, I am not a DeFi purist nor an anti-regulation zealot, I am simply an advocate for education and choice for retail investors, passionate about providing the tools required to succeed in the digital markets.

When a user deposits assets to a centralised cryptocurrency exchange, they do so in good faith that they remain safe and available to withdraw at all times. Unfortunately, when the worst happens and the exchange faces a liquidity crisis, we are seeing that exchanges will pause withdrawals and the users’ funds become locked, usually never to be seen again. Due to the infancy of regulations in the cryptocurrency market, the users’ deposits are often not insured, and there is no recompense for the end user to claim back any loss.

So, where can cryptocurrency investors hold their funds safe from the failings of these centralised exchanges? Somewhere they retain 100% control of their assets. Somewhere assets will not be loaned out unbeknown to them. Somewhere, no matter what, they can access their funds and move them freely. The answer is DeFi.

It is entirely prudent, therefore, for cryptocurrency investors to keep the lion’s share of their portfolios in a DeFi wallet. Let me explain why…

Self-Custody — DeFi wallets like the StrikeX | DeFi Crypto Wallet are non-custodial, this means when a user deposits assets to their wallet, they remain in that wallet, untouched by third parties and fully controlled by the user.

StrikeX | DeFi Crypto Wallet : a non custodial cryptocurrency wallet.

Private keys — DeFi wallets use private keys and seed phrases to allow their owners access. Without the private keys/seed phrase you are unable to get access to the wallet or its holdings. In short: your keys, your crypto.

Simply put, keeping your investment portfolio in a DeFi wallet, and retaining a smaller ‘trading fund’ on centralised exchanges greatly reduces your risk of loss in the event of an exchange collapse. At StrikeX we endeavour to make products that provide the end user with a simple, easy-to-navigate solution to get the best out of the digital markets, this is why we are integrating our newly launched StrikeX | DeFi Crypto Wallet seamlessly with our soon-to-launch Centralised trading platform TradeStrike, allowing users to easily send their assets back and forth between their CeFi trading account and their DeFi wallet.

The cryptocurrency market is still in its infancy, for us to build back better, lessons need to be learned. Until the market is closer to maturity, it is paramount that users understand the tools at their disposal to ensure their safety and success.

Joe Jowett — Co-Founder TradeStrikeBVI, CEO StrikeX.

Download the StrikeX | DeFi Crypto Wallet now.

Learn more about our project on www.tradestrike.io

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