The catastrophic demise of the FTX exchange has given rise to new worries in the DeFi and crypto circles around the world. The news of its sudden collapse spread like wildfire among the cryptocurrency and finance circles and many investors started to become skeptical about these exchanges.
Many FTX investors suffered from losing their deposits that were present in the custodial wallets.
These changes make cryptocurrency investors come face to face with the problem of using non-custodial wallets. Therefore, more investors started to move their crypto reserves out of digital wallets and into self-custodial or hardware wallets.
It is important to note that FTX was only part of a bigger problem with some other enterprises such as Celsius, Three Arrow Capital, Terra Luna, and other crypto entities running into the ground during 2022.
The ongoing banking crisis in the USA has kept the same streak as the crypto winters last year. Many users kept moving towards self-custodial options for this duration.
One of the people who are still trying to recover their lost funds from the defunct FTX exchange has shared some choice remarks for the now-convicted former CEO of the crypto exchange.
Meanwhile, another person told Wired that they should have taken some preventive measures to foresee and manage the potential risks. At present, he has some coins stored in an exchange wallet and held them for trading purposes.
Moving crypto reserves in and out of the exchange can be a costly exercise. On the other hand, a cryptocurrency investor has shared that their funds are locked in an interest-bearing account with a P2P contract or personal wallet.
Most experienced traders have promoted the idea of “Not your keys, not your money” within their social circles. In case, any centralized exchange or trading platform has your private keys the expert claim that it is under their ownership.
Hardware Wallets Give Extra Protection
Therefore, consumers must take measures to move their funds to self-custody wallets such as storing them in hardware or cold wallet for best security protection. CertiK director of Security Hugh Brooks has suggested that there are issues related to self-custody wallet and key management that needs to be addressed.
He mentioned that a considerable amount of users have migrated to self-custody wallets such as Ledger.
Ledger executives have reported increased sales and traction since November last year. Ledger sales indicate sales of 1 million new units between 2022 and 2023. Meanwhile, the hardware wallet manufacturer has managed to sell around 8 million units since its inception 8 years ago.
Meanwhile, Brooks claims that self-custody poses a greater threat to the average user. He explained that most people tend to forget or compromise their private keys or recovery phrases and end up locking themselves out of their reserves.
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