BlockFi and Celcius highlight why you should avoid exchange wallets
BlockFi recently received a revolving line of credit from FTX. The credit line was mentioned to be worth $250m.
Reports claim that this credit facility offered to BlockFi will have continuous access to $250m credit and will use the funds to pay customers.
BlockFI is crypto exchange, that also offers interest-bearing accounts, and low-interest-rate loans to customers worldwide. What makes BlockFi special is that there's no minimum balance requirement and there's a 0% charge for trades.
The Motley Fool asserts that it is an exchange that is ideal for beginners and intermediate crypto traders. They're basically saying, don't end up having your funds locked up there.
BlockFI offers crypto interest rates between 3%-8% APR, which is not a lot and should ideally translate to low risk. However, even low risk is still risk.
The recent widespread collapse of the crypto market has first of all, highlighted the frailties of exchanges like BlockFi and the dying Celcius. Also keep in mind that back in February, it was reported that BlockFi was slapped with a $100m fine for its failure to register high-yield interest accounts that the SEC deems to be securities.
How do you get hit by law from the 1940s? Don't you have lawyers? Anyway, this eventis reminiscent of the Do Kwon saga and Luna because at the end of the day, it kind of seems like a lot of these projects didn't do their homework before getting into business.
These exchanges/startups get into the crypto business and end up biting more than they can chew, offering unachievable and ambitious opportunities to customers. When the proverbial shit hits the fan, the customers suffer the most and all the lost funds will be a part of the learning process.
Not your keys, Not your Cheese
I never pass up a chance to remind the public that crypto is risky business. However, there's nothing riskier than giving your crypto to someone else like BlockFi to "manage" for you.
Giving your crypto to BlockFi or any othe exchange to manage for you is like dropping off your kid at school and leaving him/her there forever.
Think about it, the oldest crypto is Bitcoin and it is only 12 years old, everything else falls under that. If you had a 12yo kid, you'll want to sleep every night with your kid at home.
Most assets are babies, when you think about it and simply leaving them in exchanges is too risky. As celsius, BlockFi and other exchanges show, your assets are only safe in your possession.
In any case, only invest with funds that you can afford to lose. DOn't take unnecessary risks and never forget, that if it's not your key, it is not your coin.
Posted Using LeoFinance Beta