If Coinbase sinks, its taking you with it – here’s why
An attack on all crypto
May 2022 will go down as yet another eventful moment in Bitcoin's history. As Bitcoin is struggling to find strong support on its gradual descent from its ATH of $69,000 a few months before, an attack on LUNA and UST hit Bitcoin like a missile. Bitcoin lost its value from $40,000 to $26,000 in a matter of one week, causing chaos to the whole market, and affecting every Altcoin.
Traders all over the world lost a large amount of money and the market, for the first time this year, lost its vitality. However, one person in particular (apart from Do Kwon, owner of Terraform labs) is taking a huge hit from this crisis. That person is Brian Armstrong, the owner of the giant crypto exchange, Coinbase. The Bitcoin crisis and the recent loss in the value of crypto in recent months have made the Coinbase stock plunge to the point of almost bankruptcy.
The bankruptcy of an exchange, what does this has to do with you?
Unless you didn't know, Coinbase reported that it holds $256 billion in both fiat currencies and cryptocurrencies on behalf of its users. The exchange also noted that in the event of bankruptcy, “the crypto assets Coinbase holds in custody on behalf of our customers could be subject to bankruptcy proceedings.” and Coinbase users would become “general unsecured creditors,”. This means users will have no right to claim their crypto from the exchange and their funds would become inaccessible.
This should automatically come as a worrying sign for anybody who's keeping a majority of their assets in exchanges right now, especially in Coinbase. Another unexpected blow to the crypto market and your funds might be lost altogether with the exchange, like a sinking ship.
Not to mention, similar situations have already happened before. There have been many crypto exchanges that got hacked or mysteriously disappeared, taking away all the users' crypto with them. With the platform or the company gone, users have no way to recover back their funds. If you are holding a majority of your crypto on exchanges at this point, consider moving them out. This includes all well-known exchanges like Binance, Huobi, BitMex, and more.
Back to basics - Not your keys, not your coins
If you're wondering why the crypto you bought with YOUR own money will disappear when an exchange goes bankrupt, you need to understand the concept of "keys".
Every crypto wallet account starts with a private key, or "key", which is unique to each account. When you create a Bitcoin Wallet, you will receive this key in the form of mnemonics (12/24 words). These mnemonics are unique only to your account and can be used to backup and recover your funds on the blockchain. This means, that as long as you keep the "key" safe, nothing can take your coins away from you.
On the other hand, when you deposit your crypto onto exchanges, you are depositing crypto into their system and you are not given any keys. The only way you can access your funds is to log in through their system. However, whenever their system goes down or disappears, you immediately lose access to your funds.
Keeping your coins in Cold Wallet
There are 2 main ways to store cryptocurrency, on the exchange or in a wallet. As mentioned in this article, storing crypto on exchanges can be very risky, especially in the current climate.
If you are concerned about your funds on exchanges and wish to secure them, every expert will recommend you to store them on a hardware wallet or a cold wallet. These are physical devices designed especially to store cryptocurrency and are the most secure way to store crypto while giving you 100% freedom of access to your funds, unlike exchanges. Even if your wallet is lost or stolen, you can immediately restore your funds using the mnemonics on a new wallet.
One of the best places many experts choose to store their funds is in the ELLIPAL Titan Cold Wallet. The ELLIPAL is a 100% air-gapped device meaning it can never be hacked through online ways. It also has an anti-tamper mechanism that protects the device from being physically hacked. It is truly a comprehensive, all-around, ultimate protection for your cryptocurrency. Not to mention, you can trade, buy, stake, and more on the wallet.
Learn more about the ELLIPAL Titan and how it can protect your crypto assets so that it belongs to you, forever:
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