The Core Truth:

When cryptocurrency sits in an exchange account (Coinbase, Kraken, Binance), you don't actually own it in the technical sense—you own an IOU from the company. The exchange controls the private keys. This creates several risks:

  • Exchange bankruptcy: FTX collapsed in 2022, and users lost access to billions. Mt. Gox users waited years for partial recovery.
  • Account freezes: Exchanges can freeze accounts due to compliance issues, suspected fraud, or government requests.
  • Hacks: Centralized platforms are high-value targets. When breached, user funds disappear.
  • Terms of service: The exchange can change rules, add restrictions, or limit withdrawals.

Self-Custody Reality:

The phrase "not your keys, not your coins" exists for a reason. With a self-custodial wallet:

  • You control the private keys
  • No third party can freeze or seize funds
  • No counterparty risk from exchange insolvency
  • True ownership in the cryptographic sense

Why Few Will Understand:

Most people approach crypto like traditional finance—trusting institutions to hold their assets. They don't realize:

  • Cryptocurrency was designed specifically to eliminate intermediaries
  • Leaving funds on exchanges contradicts the core purpose
  • Self-custody requires technical knowledge most won't acquire
  • Responsibility for security falls entirely on the individual

The Skill Gap:

Understanding self-custody involves:

  • Generating and securing seed phrases
  • Managing private keys
  • Recognizing phishing attempts
  • Using hardware wallets properly
  • Understanding transaction finality
  • No customer service to call when mistakes happen

This IS a valuable skill precisely because most people won't learn it. Those who do gain true financial sovereignty—they can transact without permission, store wealth outside traditional banking systems, and maintain control during political or economic instability.

The statement captures an important reality: convenience (exchange accounts) comes at the cost of control, and most users won't recognize this distinction until it's too late.