FTX Fallout Reinforces Debate: Self-Custody vs. Centralized Exchanges in Crypto

The cryptocurrency community is increasingly divided over the choice between self-custody and centralized exchanges, a debate further fueled by incidents like the FTX collapse. While self-custody offers true ownership of assets through private keys, it comes with the risk of irreversible loss if keys are misplaced. On the other hand, centralized exchanges provide convenience and liquidity but expose users to counterparty risks. As the industry evolves, the balance between security and accessibility remains a critical discussion point for investors holding Bitcoin, Ethereum, and even niche tokens.

Who Holds Your Crypto? Self-Custody vs. Centralized Exchanges

The debate over self-custody versus centralized exchanges is intensifying as crypto investors grapple with control versus convenience. Holding private keys means true ownership—lose them, and assets vanish without recourse. Wallets, not exchanges, empower users with sovereignty over Bitcoin, Ethereum, or even niche tokens like cat-themed coins.

Centralized platforms dominate trading volume but introduce counterparty risk. The collapse of FTX remains a cautionary tale. Yet their liquidity and user experience keep retail traders tethered. Self-custody solutions range from hardware wallets to open-source software, each requiring technical diligence.

The industry''s maturation hinges on this tension. Institutional adoption favors regulated custodians, while crypto purists champion decentralization. Neither approach is universally superior—just fundamentally different philosophies of asset ownership in the digital age.