How to Protect Your Bitcoin from Exchange Collapse
The most effective protection is moving your Bitcoin to self-custody and using non-custodial trading platforms. If you don't hold your keys, you don't truly own your Bitcoin — and you're exposed to every risk the exchange faces.
What Happens When an Exchange Collapses?
When a crypto exchange fails — whether from fraud (FTX), hacking (Mt. Gox), or insolvency — users who kept their assets on the exchange lose access to their funds. In FTX's case, users waited years in bankruptcy proceedings to recover a fraction of their assets.
Exchange collapses are not rare events. Since Bitcoin's inception, dozens of exchanges have shut down, been hacked, or defrauded their users. Mt. Gox (2014), QuadrigaCX (2019), FTX (2022) are just the most prominent examples.
How to Protect Yourself
Move to self-custody: transfer your Bitcoin to a hardware wallet you control. Your keys, your coins.
Minimize exchange exposure: only keep on exchanges what you're actively trading. Move the rest to cold storage immediately after buying.
Use non-custodial platforms: trade on platforms like Flashnet where you keep custody of your assets throughout the trading process.
Diversify across custody solutions: use a hardware wallet for long-term holding, a multisig setup for large amounts, and a hot wallet for active trading.
Verify proof of reserves: if you must use a centralized exchange, choose ones that publish proof-of-reserves attestations.
Non-Custodial Trading on Flashnet
Flashnet is a non-custodial trading platform on Bitcoin. You trade directly from your wallet — your Bitcoin never sits in an exchange-controlled address. Even if Flashnet's frontend went down, your assets remain safely in your own wallet.
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