What is a crypto exchange?

A crypto exchange is a company where people buy and sell bitcoin and other coins, for ordinary money or for each other. To trade, you send it money or coins, and it keeps them in an account in your name.

Coins left in an exchange account are held for you: the exchange controls the private keysPrivate keyThe secret number that lets you spend your bitcoin. Whoever knows it controls the coins, so it must never be shared., and your balance is its promise to pay. The US Securities and Exchange Commission warns that if a custodian such as an exchange “is hacked, shuts down, or goes bankrupt, you may lose access to your crypto assets.” Customers of Mt. Gox in 2014 and FTX in 2022 found that out.

Withdrawing coins to a wallet you control puts the keys in your hands, and with them the job of keeping them safe. If your wallets are “lost, stolen, damaged, or hacked, you may permanently lose access to your crypto assets,” the same SEC guide says.