Even though cryptocurrency is generally an emerging industry and there is still work to be done in terms of crypto-related information being disbursed, there are certain things that are considered common knowledge within the industry, particularly with regards to security. One of these is the generally held belief that one’s crypto assets should be stored in secured wallets and not on cryptocurrency exchanges. One of the reasons for this is that cryptocurrency exchanges fairly frequently become hacked and thus, funds are more susceptible to being stolen while stored on an exchange.
According to a survey published on November 22, 2019, by Binance, a significant portion of institutional investors do not follow this rule as it was found that many of them still keep their wealth on cryptocurrency exchanges despite the risks involved.
The survey in question was conducted as part of Binance’s Institutional Market Insights research and polled 76 institutional investors about their training habits. According to the results of the survey, 92% of investors choose to keep their cryptocurrency with trusted third parties in lieu of hard wallets and cold wallets. This goes against the commonly circulated needed advice that cryptocurrency should not be held on exchanges but rather in secure locations.
“Exchanges remain as the most popular choice for cryptoasset storage amongst our institutional and VIP clients at 92.1%,” Binance stated, “When moving to self-storage, cold wallets are the second most favored choice, given their improved safety and control. Third-party custody services were the least popular option at 2.6%.”
The investors, however, cannot be said to say have a huge amount of exposure in terms of capital as above 50 percent of them held cryptocurrency of fewer than 10 units of a coin. Still, exchanges are repeatedly warning all investors, both individual and institutional, that they should not keep their funds on exchanges but only keep them in wallets in which they have the private keys. Considering how many cryptocurrency exchanges have been hacked in recent times, this is advice that should be heeded by all.