But the fact is that almost everybody trusts an institution more than they trust themselves to physically hold their life savings.
Huh? The Bitcoin of probably about 95% of retail investors is kept in their own name by some broker like Binance or CoinBase or the others.
Can you back these claims up? An investor who puts millions into FTX, Voyager or Celsius (as recent examples of collapsed crypto firms) isn't a serious one.
But most average investors--even big ones--don't have the infrastructure. They have to rent that from somebody else e.g. a financial institution.
Except that almost every "reputable" centralized exchange to this date has experienced cyberattacks that resulted in loss of funds. So, they don't just trust a financial institution; they trust an entity that is a matter of time until it is hacked or bankrupt. Given that information, I'd consider it obtuse to trust my money in such a firm.
There's no "problem" with keeping an account representing Bitcoin in your name, and I didn't say that large amounts "cannot / must not" be kept anonymously, but rather most people don't want to do that.
They don't want to do that, because they must report their earnings / investments / properties to the government. That's why I used "cannot" and "must not". If you buy a house and hide it to your government, you're in big trouble. Otherwise, I'm sure most people wouldn't want to report their properties anywhere.
Yes, they can pick the wrong one, but the fact is that most Americans don't worry, on a daily basis, that somebody in the county records office is going to switch the name on their house deed making them lose their house.
This is a very bad analogy. If some random stranger switches the name of your house to theirs, you can sue them and get it back. Same goes for banking. If a random stranger compromises Binance and steals your deposit, then it is outside's the police's and the law's power. The coins are theirs now. The end.
Other people might have different personalities, but I think I'm correct in saying that most consumers are like me, given that, for instance, almost nobody buys Bitcoin anonymously with only a private key, but instead they use a broker with KYC.
I agree that 99% of the userbase would buy from a KYC-ed broker firm, but I'd argue that quite a lot of them would withdraw the coins to their wallets.