When Satoshi Nakamoto first created Bitcoin the idea was creating a decentralized financial system where people control their own money. But today millions of users leave their crypto on Centralized Exchanges. This is not much different than using a bank. What is the point of crypto if you don’t own your funds?
Storing crypto on a Centralized Exchange (CEX) is a huge risk. The phrase “Not your keys, not your coins” is a warning: if you don’t control your private keys you don’t truly own your crypto. History has shown that centralized exchanges can fail, get hacked, or freeze funds leaving users with nothing.
Why centralized exchanges are risky
1. You don’t control your funds
Obviously when you deposit crypto in an exchange it is no longer yours, it is the exchanges. If the exchange disappears so do your funds.
2. Hacks and security breaches
CEX’s are often targeted by hackers. Some of the biggest hacks include:
- Mt. Gox (2014): Around 850,000 BTC were stolen, leading to the exchange’s bankruptcy.
- Coincheck (2018): Hackers stole around $530 million worth of NEM.
- Bybit (2025): In a recent breach Bybit suffered losses exceeding $1.4 billion in various tokens. And many more
3. Exchange collapses and bankruptcy
Some exchanges collapse not because of hacks, but because they spent your money and can’t cover the withdraws.
Some examples include:
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FTX (2022): Customer funds were being funneled into the exchanges sister company Alameda research where they were used to cover risky bets. An $8 billion hole was created in the balance sheet and the exchange collapsed. Withdraws were frozen and millions of users lost their money.
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QuadrigaCX (2019): The CEO, Gerald Cotten, controlled all the exchange’s funds and when he died, $190 million in customer deposits disappeared. Investigators later found that Cotten had been using customer funds for personal spending and fraudulent trading.
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Celsius (2022): Marketed as a “crypto bank” Celsius promised high yields with “minimal risk”, but was actually using customer funds to pay previous users, a classic Ponzi scheme.
How to protect yourself
Always store your crypto in non custodial wallets. Once a trade is complete withdraw all money from the CEX, only keep what you can afford to lose on CEX’s.
Some great and easy to use non custodial wallets include:
- CakeWallet
- MetaMask
- Phantom (closed source)
How CypherGoat helps against the risks of cex’s
CypherGoat is a crypto exchange aggregator. We find the best rates for your crypto swaps, with no sign up or KYC. All transactions occur on chain, meaning that an exchange never has access to your funds for longer than it takes for the swap to complete! This greatly minimizes the risks associated with using centralized exchanges.
See the magic for yourself at cyphergoat.com
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