Inside Crypto Exchanges: Lessons from 11 Years in the Market

The Gateway to Crypto—But at What Cost?

Crypto exchanges are the backbone of the digital asset market. They allow traders to buy, sell, and hold cryptocurrencies with ease. But behind the convenience lies a history filled with collapses, hacks, and outright scams.

Having been in the crypto space for over a decade, I’ve witnessed exchanges rise to power, only to disappear overnight—taking users’ funds with them. From the infamous Mt. Gox collapse to FTX’s shocking downfall, history has shown us one painful truth: not all exchanges can be trusted.

So, how do you protect yourself? And more importantly, how do you know which exchange is safe to use? Let’s break it down.

A History of Crypto Exchanges Running Away with Money

Many newcomers assume that all exchanges are legitimate, but the reality is far from that. Over the years, several major exchanges have shut down unexpectedly, leaving investors stranded. Here are some of the biggest examples:

1. Mt. Gox (2014) – The First Major Collapse

Once handling over 70% of Bitcoin transactions, Mt. Gox suddenly filed for bankruptcy, claiming hackers had stolen 850,000 BTC—worth billions today. Users never got their funds back, and it was a wake-up call for the industry.

2. QuadrigaCX (2019) – The Mystery of the ‘Lost’ Private Keys

This Canadian exchange collapsed after its founder, Gerald Cotten, reportedly died—taking the private keys to $190 million in customer funds with him. To this day, many believe it was an inside job.

3. FTX (2022) – A Billion-Dollar Fraud in Plain Sight

FTX was considered one of the safest exchanges—until it wasn’t. The platform collapsed after it was revealed that customer funds were misused, leading to an $8 billion hole. Sam Bankman-Fried, once a crypto hero, is now behind bars.

And these are just the most famous examples. Many smaller exchanges have pulled exit scams, locked withdrawals, or suddenly disappeared.

Current Exchanges: Who Can You Trust?

Today, there are still trustworthy exchanges, but you need to be cautious. Here’s how to evaluate them:

✅ Regulated vs. Unregulated: Licensed exchanges like Coinbase and Kraken are safer due to legal oversight, while offshore platforms can disappear overnight.

✅ Proof of Reserves: Binance, OKX, and others now provide transparency reports showing they hold customer funds 1:1.

✅ Security Measures: Does the exchange use cold storage? Does it offer two-factor authentication? Security matters.

✅ Withdrawal Limits: Some exchanges make it easy to deposit but hard to withdraw. Always test small withdrawals first.

✅ Past Reputation: If an exchange has had a history of freezing withdrawals, delaying payouts, or questionable behavior, stay away.

The Smart Approach: Don’t Leave Everything on Exchanges

Even if you use a trusted exchange, the golden rule is: “Not your keys, not your coins.” Keeping your crypto in a self-custody wallet (like a hardware wallet) ensures no exchange can freeze, steal, or lose your funds.

Exchanges should be used for trading, not storage. If history has taught us anything, it’s that even the biggest exchanges can fail overnight.

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