many people are parnoid. and fear their own family getting acess to keys. so they dont just have 1000 copies of keys dotted around the house just in case..
yet then stupidly think its safer to put funds into a custodian where then the user himself does not even have a key to guarantee he can get out his deposit
i completely understand for 100 years people have trusted custodians(fiat banks) and in decent decades had the trust that their deposits are insured by governments even if custodians went bankrupt..
but the cryptosphere of crypto custodians dont operate the same way and dont have the same regulations or even a insurance policy
this is where education needs to come in
teaching people not the "get rich quick" but "if you invest, secure your investment into YOUR control.. because its YOUR property YOUR responsibility. if you hand it to someone else its no longer yours"
All of us need to weigh just how much liquidity we need for our coins.
This will vary quite a bit.
I have multiple wallets and multiple exchanges for multiple reasons.
I am subject to USA law.
This means paying taxes and reporting things to the government.
But it also means FDIC insurance for cash $usd in banks and in coinbase.
SO if I want liquidity and use coinbase I can keep up to $250,000.00 USA cash and it is insured by the Feds.
but if I have 1 btc and coinbase fails tough luck.
Yes I can put a coin in coinbase and convert to usd and the wealth is now safe.
But if I use USD to buy on coinbase I now have a coin that is not safe. So I can pull it off the exchange to a wallet.
Does all of the above sound convoluted and confusing? Fuck yeah and it is convoluted and confusing.
One simple example I mine say Doge on a pool. When it is 1000 doge I move it to coinbase. it was not safe on the pool. it was not safe in coinbase . I make it safe and change it to cash say 85 usd. I decide I want to do a monthly dca to btc for 200 a month. So I buy 200 btc a month from those sales. I then secure the btc in my own wallet
I do this 1 time a week. I create 52 entries when I move the coins to coinbase. I create 52 entries when i turn them to cash. I create 12 entries buying the monthly btc and I create 12 entries when I move the btc to a safe wallet.
AT the end of the year. 85 x 52 = 4420 gross income from doge mining which ends up as 2400 in btc and 2020 in cash will mean 52+52+12+12 = 128 entries on tax forms.
or just mine and keep all the coins on the pool till late december. then move to coinbase buy some btc and hold the cash which is 4 entries on the tax form.
Really long and complicated example but it is why people let shit sit on an exchange they do not want to do all of the above to keep a mere 4 or 5 grand safe.