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Last week, The recent Bybit hack— the largest cryptocurrency theft in history—has once again exposed the risks of leaving Bitcoin on an exchange. Hackers stole an estimated $1.5 billion in Ethereum. This event is a humbling reminder of the importance of self-custody. While the company claims it can cover the loss, history has shown that users trusting exchanges with their funds often pay the price.
Bitcoin was designed to be self-sovereign money—meaning you should be the sole controller of your assets. Yet, many users still store their Bitcoin on exchanges, ignoring the single most important rule in Bitcoin: "Not your keys, not your coins."
In this guide, we’ll break down why self-custody is the only safe way to store Bitcoin, how exchanges work (and why they’re risky), and what steps you should take to protect your funds.
What Happens When You Leave Bitcoin on an Exchange?
Many people think that when they buy Bitcoin on an exchange like Bybit, Binance, or Coinbase, they own it. In reality, they do not.
Exchanges Hold Your Bitcoin – Not You
When you store Bitcoin on an exchange, the exchange holds the private keys to your funds. In simpler terms:
- You have an account balance that states your claim to bitcoin.
- The exchange actually controls the bitcoin in their wallets.
- You must ask permission to withdraw.
What Could Go Wrong?
- Hacks (Like Bybit’s $1.5B Theft): Even exchanges with “cold storage” solutions have been hacked. If an exchange loses your Bitcoin, there’s no guarantee you’ll get it back.
- Insolvency & Freezes: Exchanges can become insolvent or freeze withdrawals during volatility, leaving you unable to access your funds.
- Regulatory Seizures: Governments can shut down exchanges or seize assets, locking you out of your own bitcoin.
- Counterparty Risk: You’re trusting a third party to “hold” your bitcoin. But Bitcoin was invented so you wouldn’t have to trust anyone.
Exchanges are convenient for buying and selling, but they are not wallets.
How Self-Custody Protects Your Bitcoin
The only way to truly own your bitcoin is by self-custody—meaning you control your private keys.
How Bitcoin Wallets Work
A Bitcoin wallet is a combination of software and hardware that lets you store and control your bitcoin. The key difference? Only you hold the private keys.
👉 If you control the keys, you control the bitcoin.
👉 If an exchange controls the keys, they control the bitcoin.
To understand how wallets work, check out our guide on Bitcoin Self-Custody & Seed Phrases.
How to Move Your Bitcoin Off an Exchange
If you currently have bitcoin on an exchange, here’s how to secure it:
1️⃣ Get a Bitcoin Wallet – Choose a self-custody wallet that suits your needs
2️⃣ Withdraw Your bitcoin – Use the withdrawal option on the exchange and enter your wallet address.
4️⃣ Verify the Transfer – Use a Bitcoin block explorer or wallet software to confirm your bitcoin has arrived in your wallet.
The Harsh Reality: Most People Learn Too Late
The biggest lesson from Bybit, Mt. Gox, FTX, Binance hacks, and others is this:
🚨 If you don’t control your bitcoin, someone else does.
🚨 If someone else controls it, they can lose it.
Time and time again, users ignore self-custody until it's too late. The best time to secure your Bitcoin is before the next exchange hack.
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📞 Book a call now to start mining Bitcoin and securing your financial future the right way.
Disclaimer: The information provided in this blog is for informational and educational purposes only and should not be construed as financial advice. Please consult with a financial advisor or conduct your own research before making any financial decisions.
