Quote from: bluespaceant on February 27, 2014, 10:14:03 PM

Never deposit or keep a significant portion of your bitcoin or fiat currency on an exchange unless you are OK with losing all of it. At some point, because of theft, seizure, or negligence on the part of the exchange, you may be faced with losing it all, and you will most likely be powerless to do anything about it.

If you are using an exchange to store bitcoin, reconsider whether this is really necessary. Many people store bitcoin on exchanges so they are able to quickly sell if necessary. Most exchanges will give you access to bitcoin deposits with 6 confirmations. Keeping your bitcoin in external wallets and being willing to wait for an hour or so for 6 confirmations reduces the risk of storing bitcoin on an exchange where it can be stolen, seized, or lost. Why take the risk? Is one hour really too long for you to wait to sell your bitcoin? I would argue that it is worth waiting for 6 confirmations to have the peace of mind that your bitcoin is safe and secure outside of an exchange.

As a side note, consider using multiple external wallets. Why put all your eggs in one basket? If you are storing 100 bitcoins, it is better to have 5 wallets with 20 bitcoins each than 1 wallet with 100 bitcoins. Depending on the amount of bitcoin you have, you may want to spread it out amongst even more wallets. You can make as many wallets as you need and it does not cost anything to do soso take advantage of that feature to reduce the risk. Make backups of the wallets and store them in safe and secure places.

If you are making trades in or out of bitcoin, divide your holdings and spread out your transactions so that you never have all of your bitcoin or fiat currency on a particular exchange at one time. For example, if you want to buy 100 bitcoins, deposit enough fiat currency to buy 20 bitcoins and wait until you have the 20 bitcoins that you purchased in an external wallet before depositing fiat currency again. If you do not have the bitcoin that you purchased in an external wallet that only you control, do not initiate another transaction. This takes longer, but it reduces risk of losing all 100 bitcoins at once or 100 % of the fiat currency you were planning to use to buy bitcoin. If you are selling 100 bitcoins, deposit and sell 20 at a time and wait until you receive the fiat currency payment before you deposit another 20 bitcoins to sell. This takes a lot longer, but it reduces the risk of losing 100% of the fiat currency or all 100 bitcoins at once.

Before using an exchange, take some time to read about the exchange on these forums and then make a decision whether you are willing to risk losing bitcoin or fiat currency on that exchange. The exchanges that have serious problems often have multiple ongoing threads on this forum. Multiple threads about an exchange with unresolved issues should serve as a huge red flag. If those who lost bitcoin or fiat currency on MtGox had reviewed the numerous threads here about MtGox, it is unlikely they would have chosen to take the risk of using MtGox to buy, sell, or store bitcoin. If they had reviewed those threads and still decided that they were willing to take the risk, splitting up their transactions as noted above would have reduced their overall loss.

TL;DR

DO NOT leave what you can't afford to lose in ANY exchanges.

yashin

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