Why You Shouldn’t Keep All Crypto in Exchanges

If you’re a student or working-class person in Nigeria, Kenya, Ghana, Uganda or South Africa, chances are you’ve heard of cryptocurrency (crypto) and maybe you already use it. One big question is: Where should I keep my crypto? Many people keep it on an exchange (a place where you buy/sell crypto), because it seems easy. But there are strong reasons why you shouldn’t keep all your crypto in exchanges. In this article we’ll explain those reasons clearly, show you how to store crypto safely, compare storing on exchanges vs self-custody, give examples relevant to Africa, and help you build a smart plan.

We’ll use the main keyword “keep all crypto in exchanges”, plus related terms like “crypto exchange risk”, “self-custody crypto wallet”, “cold wallet vs hot wallet”, “why not your private keys”, and “crypto storage Africa”. The goal is to help you understand and act.

What Does “Keeping Crypto in an Exchange” Mean?

Definition of Exchange Storage

An exchange is a platform (centralised or decentralised) where you can buy, sell or trade cryptocurrencies. Examples include global ones like Binance, Coinbase, but in Africa also local ones.
When you store crypto in an exchange, you are depositing your cryptocurrency into the exchange’s custodial wallet. The exchange holds the private keys (the secret codes that control your crypto) on your behalf. You see your “balance” in your account, but you do not hold the private keys if the exchange is custodial.

Why People Do It

Convenience: You can buy/sell, trade, move money faster.
Simplicity: Especially for beginners, using an exchange is easier than managing a wallet.
Accessibility: In Nigeria, Kenya etc you may have fewer options for self-custody infrastructure, so using an exchange looks simpler.
Liquidity: Keeping crypto in an exchange lets you quickly trade or convert if needed.

But Why “Don’t Keep All” Then?

Because while convenience is good, risk is also high. Keeping all your crypto in one place—especially an exchange—means you are heavily exposed to the risks tied to that exchange. What if it hacks, goes down, withdraws are frozen, laws change, or you lose access? For students and working-class folks who may have limited savings, such risk is serious.

Major Risks of Keeping Your Crypto Fully On Exchanges

Here are detailed reasons why you should avoid putting all your crypto in exchanges. Each risk matters for you, especially in African contexts.

Lack of Control Over Private Keys

One of the core rules in crypto is: “Not your keys, not your coins.”
When you leave your crypto on an exchange, the exchange holds the private keys. This means if the exchange gets hacked, mismanages funds, or decides to freeze you out—you might lose access even though you “see” your balance. For you in Nigeria, Kenya, Uganda or Ghana: if you rely on an exchange, you are trusting someone else with control over your assets rather than holding them yourself.

Exchange Hacks and Security Breaches

Exchanges are major targets for hackers because they hold large amounts of crypto.
Example: major historic hacks (like Mt. Gox, FTX) show that even large platforms can fail or be breached. If your funds are on an exchange when a hack happens, you might be stuck. Particularly if you don’t live in a country with strong legal protections or your local law enforcement is weak.

Withdrawal Freezes, Insolvency, Exchange Shutdowns

An exchange may freeze withdrawals or shut down due to regulatory action, liquidity issues, or insolvency.
If this happens and you cannot withdraw your crypto when you need it—your funds may be stuck or lost. For working‐class citizens, that means no access to your savings when you need them most.

Regulatory and Local Bank Risks

Exchanges may operate in jurisdictions with weak regulation, or suddenly local banks or governments may clamp down on crypto exchanges (especially in Africa where legal frameworks are still developing).
That means your exchange in Nigeria or Kenya might face local bank issues, withdrawals blocked, or regulations change—impacting your access.

Mixed Custodial Risks and Use of User Assets

Many exchanges use your deposited crypto in ways you may not know (lending, staking, trading) and you have limited claim if things go wrong.
This means even though you deposit the crypto, you might not have real control or claim if the exchange misuses it. For students or working class individuals with limited funds, trusting an exchange’s claims without evidence is risky.

Lack of Insurance or Guarantee

Unlike bank savings, your crypto on an exchange may not be insured. If funds are lost you may receive nothing in return.
In countries with weaker consumer protections (like Nigeria, Ghana, Uganda) you might have less recourse if something goes wrong.

Privacy and Data Risks

Keeping your crypto on an exchange often means KYC (know your customer) data, identity linked to your crypto holdings. If the exchange suffers a data breach, your identity and holdings could be exposed.
For young people or workers who are budget-sensitive, protecting your identity and assets is important.

Why You Should Use Exchanges—but in the Right Way

It’s not that you should never use an exchange—exchanges serve important purposes. But you should use them wisely.

Why Good to Use Exchanges

When buying your crypto initially, an exchange is often the easiest.
When you want to trade or swap quickly.
For active trading parts of your portfolio.
For learning and accessing the crypto market easily from Nigeria, Kenya etc.

How to Use Exchanges Safely

Keep only a small portion of your crypto on the exchange—what you intend to trade in short term.
Withdraw leftovers to your personal wallet (hot or cold) for long-term holding.
Enable strong security: 2FA, anti-phishing codes, withdrawal address whitelisting.
Choose reputable exchanges with good track record, transparent proof of reserves.
Monitor local regulations in your country so you know if the exchange may face issues.

Example of “Right Use”

You are a student in Lagos. You deposit ₦50,000 worth of crypto for trading. You leave ₦5,000 on the exchange for upcoming trades. The ₦45,000 you move into your own self-custody wallet (hardware wallet or trusted software wallet). That way you’re trading actively with the small amount but keeping the majority safe.

What is Self-Custody and Why It Matters

Definition of Self-Custody (Holding Your Own Wallet)

Self-custody means storing your crypto in a wallet where you hold the private keys (and thus full control). Could be a hardware wallet (cold storage), software wallet (hot wallet you control), or a paper wallet.
Key principle: You, and only you, control access.

Why Self-Custody Protects You

You aren’t depending on an exchange’s security. Even if the exchange gets hacked, shutdown or freezes withdrawals—your wallet remains under your control.
You hold the keys: “Not your keys, not your coins.”
For long-term holdings (a student saving crypto for future), having asset in your own wallet reduces risk of external mishaps.

Risks of Self-Custody (so you must do it right)

If you lose your private key/seed phrase, your crypto may be gone forever.
Cold wallets may cost money (hardware).
If you make a mistake (send crypto to wrong address), you cannot reverse it.
For beginners, managing your own wallet may seem complex—but with learning you can master it.

Example for African Users

You are a working person in Nairobi. You buy some Bitcoin and another token. After initial purchase on the exchange, you withdraw most of your holdings to a hardware wallet (say a Ledger Nano) that you keep safely. You keep a small amount on exchange for trading. By doing this you significantly reduce your risk of losing the bulk of your holdings if the exchange gets into trouble.

Exchange-Storage vs Self-Custody: A Detailed Comparison

Key Aspects Compared

Aspect	Exchange Storage	Self-Custody Wallet
Control of Private Keys	Exchange holds them	You hold them
Dependency	Dependent on exchange’s security, business	Dependent on your good practices
Liquidity/Trading	High – ready to trade	Less convenient for instant trading
Security Risk	Higher due to centralised target	Lower from external hacks but risk from user error
Withdrawal/Access Risk	May be frozen or delayed	You control access (if you hold keys safely)
Suitability for Trading	Very good	Suitable for long-term holding
Suitability for Savings	Limited (due to higher risk)	Excellent for long-term storage

What This Means for You

If you are actively trading or monitoring short-term moves, keeping some crypto on an exchange makes sense—but keep that portion small.
For your savings or long-term holdings (for example you believe crypto may grow over years), you should move to self-custody to protect them.
Especially in Nigeria, Kenya, Ghana or Uganda where banking/crypto regulation may change, you want to minimise risk of being exposed through an exchange freeze or bank restriction.

How to Move Crypto from Exchange to Self-Custody – A Step-by-Step Guide

Step 1: Choose a Good Wallet

Hardware wallet (cold storage) is very secure: examples like Ledger, Trezor.
Software wallet (hot wallet you control) is easier but slightly higher risk (connected to internet).
Ensure the wallet supports the crypto tokens you hold.
Purchase hardware wallet from official source (avoid used or counterfeit devices).
For Africa: consider availability of wallets in your country, cost of shipping/import, customs.

Step 2: Set Up Your Wallet Carefully

When you open your wallet, you’ll get a seed phrase (12, 18 or 24 words). Write it down on paper, in a safe place, not on a computer connected to internet.
Do not share your seed phrase with anyone.
Enable extra security settings (pin code, passphrase if supported).
Practice small test transfer first so you get comfortable.

Step 3: Transfer Crypto from Exchange to Wallet

On your exchange account, select “Withdraw” or “Send” crypto.
Copy the receiving address from your wallet (be careful: each token has its own address).
Choose the correct network (e.g., if token is on Ethereum network, choose “ERC-20”).
Initiate the transfer with small amount first to test.
Wait for confirmations on blockchain, check your wallet has received.
Then transfer the rest if all good.

Step 4: Verify Everything and Keep Records

Confirm the crypto arrived correctly in your wallet.
Save transaction ID, date/time, how many tokens, from which exchange, to which wallet address.
Keep your wallet device (if hardware) in a safe location (locked drawer, safe, bank vault if possible).
Keep backup of seed phrase in secure physical place (not stored loosely on computer).

Step 5: Decide What You Leave on the Exchange

Only leave crypto on the exchange that you plan to trade actively or use soon.
Everything else (long-term holdings) move to your wallet.
This division allows you to benefit from exchange convenience while minimising risk.

Step 6: Periodically Review Your Storage Strategy

Check that your wallet is still safe (device working, seed phrase intact, no damage).
Confirm your exchange account security (2FA still enabled, review withdrawal history).
If regulation in your country changed, you may decide to move even more assets off exchange.
If you plan to stake or use tokens actively, you may keep them in wallet but you may also use exchange for staking—but weigh risk.

Scenarios & Examples: Why Keeping All on Exchange Went Wrong

Scenario 1: Exchange Hack in Africa Context

Imagine you’re in Lagos and you deposited ₦300,000 worth of crypto on an exchange. You believe the exchange is safe because it has many users. One day the exchange is hacked. Your funds are in a custodial wallet of the exchange, you don’t hold the keys. The exchange suspends withdrawals, many users wait months, some get partial refunds, others get nothing. Because you had all your savings there, you face a big loss. If you had moved 80 % of that to your own wallet and left only ₦60,000 on the exchange for trading, your main savings would be safe.

Scenario 2: Regulatory Freeze in Kenya

You’re in Nairobi and an exchange you use is suddenly hit with regulatory issues—government orders freeze on withdrawals. Your account is locked for weeks. You cannot get your funds when you need them (say you wanted to convert to cash for tuition or bills). If you had your long-term funds in your own wallet, you could withdraw from wallet or move funds via other means.

Scenario 3: Exchange Terminates or Declares Insolvency

In Ghana, you use a smaller local exchange. It declares bankruptcy, user funds are part of the claims, you may wait years to recover or recover nothing. You learn that you didn’t really “own” the tokens—they were in the exchange’s custody. If you had moved your tokens to a self-custody wallet, you would still have them.

These examples show why keeping all your crypto on exchanges is risky. For students and working class folks, risk of losing savings is too high.

Tailoring to African Students & Working-Class Citizens: What to Consider

Local Banking and Currency Issues

In countries like Nigeria, Kenya, Uganda, Ghana and South Africa:

Crypto-friendly banking regulations may be weak or changing.
Some banks may block transfers to/from exchanges.
Currency fluctuations mean your crypto’s local value can change a lot—even if the crypto value remains stable.
Because of this, you want your storage strategy to account for local conditions:
Use wallets you control that aren’t dependent on local bank account access.
Keep some funds in local currency savings (emergency) and crypto holdings separate.
Consider the cost of hardware wallets, shipping, import/customs in Africa.

Technical and Educational Considerations

Many students or working class individuals may not have deep technical knowledge yet—so learning wallet setup is key.
Use wallet brands or methods that are beginner-friendly yet secure.
Budget for hardware wallet cost (though there are low-cost alternatives) but balance cost vs risk.
Choose products with good local support or clear instructions online.

Community & Peer Support

Join local crypto communities (Nigeria, Kenya, Ghana, Uganda) to learn from others.
Share experience about wallet setup, secure practices.
Be aware of local scams that target users: phishing links pretending to be exchanges, fake wallet apps, etc.
As a student or worker, peer learning can reduce mistakes.

Diversify Risk

Don’t put your entire savings into crypto at all. Keep part in bank savings, emergency fund.
When you invest in crypto, divide between “active trading” (on exchange) and “long-term holdings” (in your wallet).
If you use an exchange, maybe keep small amounts for trading, the bulk in self-custody storage.

Pros & Cons of Keeping Crypto On Exchange vs Self-Custody

Pros of Keeping Crypto On Exchange

Very convenient: easy access to buying/selling.
Good for active trading.
Some exchanges offer extra features (staking, lending) while crypto is on exchange.
Beginners may find it simpler and lower friction initially.

Cons of Keeping Crypto On Exchange

Risks: hack, freeze, insolvency, regulatory changes.
You don’t hold private keys, you are entrusting exchange with custody.
If something goes wrong you may lose access or funds.
For long-term savings it’s less safe.
Especially in Africa, local regulatory/banking risks add extra layer.

Pros of Self-Custody (Wallet)

You hold private keys: full control.
Less dependency on third-party platforms or their failures.
Good for long-term holdings (savings).
More privacy and reduced risk of freezing.

Cons of Self-Custody

You must ensure your own security: backup seed phrases, protect keys.
Slightly more technical: wallet setup, hardware cost.
If you lose your private key/seed phrase you lose access forever.
Moving funds out of wallet for trading is a step you must remember.

Balanced View for Students / Working-Class

If you are just starting, you might keep a small amount on exchange for trading, and move the rest to your own wallet. Over time, build your wallet knowledge, increase your self-custody portion. That way you get the convenience now and build up security for the future.

Step-by-Step: How to Safely Move Your Crypto Off Exchange (For African Users)

Step 1: Select a Trusted Wallet

Research hardware wallets (cold storage) and reputable software wallets.
Check availability in your country (Nigeria, Kenya etc). Consider shipping/import cost.
Purchase hardware device from official source; avoid second-hand.
Download software wallet from official site/app store; verify authenticity.

Step 2: Secure Your Wallet Setup

On setup you get seed phrase: write on paper, store offline, maybe safe-deposit box or very secure place.
Enable PIN, passphrase if available.
Test sending and receiving small funds to wallet (ensure you know how).
Practice recovering wallet from seed phrase (maybe with tiny amount) so you know how to restore if device lost.

Step 3: Withdraw from Exchange to Wallet

On the exchange, choose withdrawal address carefully. Use copying/pasting (not manual typing) to avoid mistakes.
Select correct network (especially if token supports multiple networks).
Try a small “test” withdrawal to ensure everything goes through.
Once test is successful, transfer the bulk of your funds.
Keep transaction ID, time, amount, wallet address for your records.

Step 4: Reduce Exposure on Exchange

After transfer, reduce your holdings on exchange to small amount intended for trading.
Remove any linked bank account or credit card if you no longer intend to trade actively.
Make sure you’ve disabled auto-staking or auto-loan features you might have enabled on exchange.
Keep your exchange login information secure: strong password, unique, enable 2-factor authentication (2FA), withdraw address whitelisting if available.

Step 5: Ongoing Security & Best Practices

Keep your hardware wallet in a safe place (locked drawer, safe, bank).
Make a backup of your seed phrase (maybe metal backup plate) and store in secure place.
Periodically review your wallet and exchange security settings.
Stay updated on regulatory changes in your country (Nigeria, Kenya etc) which might affect your exchange holdings or movement.
If you plan to use your holdings later (for spending or converting to local currency), consider how you will move crypto from wallet to fiat (and whether local banks/exchanges support that).

Summary Table: Why You Shouldn’t Keep All Crypto in Exchanges & What To Do Instead

Key Point	Explanation	Action Step
You don’t hold private keys	Exchange controls keys, you don’t.	Use self-custody wallet for holdings.
Exchange hacks & insolvency risk	Exchanges have been hacked or collapsed.	Move long-term holdings off exchange.
Withdrawal freezes/regulation risk	Exchanges can freeze funds, be affected by laws.	Keep small amount on exchange, majority in wallet.
Convenience vs security trade-off	Exchange is easy but less secure; wallet is secure but takes more work.	Balance convenience (trade funds) + security (savings).
Local African context risks	Banking, regulation, currency issues in Nigeria, Kenya, etc.	Use wallet that works globally; keep fiat savings safe.
Self-custody requires responsibility	Losing seed phrase = losing funds.	Back up seed, learn wallet use.

Frequently Asked Questions (FAQs)

Here are ten plus questions many students and working-class individuals ask about keeping crypto in exchanges vs wallets—and clear answers.

Is it okay to keep small amounts of crypto on an exchange?
Yes — for trading purposes or quick access you can keep a small amount on an exchange. The key is not to keep all your holdings there. The bulk should be in your own wallet if you are holding long-term.
How do I know if an exchange is safe?
Look for: strong security record (no major hacks), proof of reserves, transparent leadership, good reviews, proper regulation/licensing, good withdrawal record. But even safe exchanges carry risk; self-custody is still best for long-term holdings.
What is a hardware wallet and is it expensive?
A hardware wallet is a physical device that stores your crypto keys offline (cold storage). Examples: Ledger, Trezor. It costs maybe US$40-150 depending on model. For African users this is a worthwhile investment if you hold significant crypto long-term.
If I move my crypto to a wallet, can I still trade?
Yes, but you will first need to withdraw from wallet to exchange when you want to trade. Many users keep “trading funds” on exchange, and “savings funds” in wallet.
What if I lose my wallet’s seed phrase?
If you lose it and don’t have a backup, you may lose access permanently. That’s why backing up is critical. The wallet is your responsibility.
Which wallet should I choose for Nigerian/Kenyan/Ghana/Ugandan users?
Choose wallets that support the tokens you hold, have good reputation, and that you can ship (hardware) or install (software) in your country. Consider import/customs costs, local support, documentation in your language.
Does moving crypto to a wallet cost fees?
Yes. When you withdraw crypto from an exchange, you pay network transaction fees (on blockchain) and sometimes withdrawal fee imposed by exchange. Make sure to account for that, especially for smaller amounts.
If I keep my crypto in a wallet, am I safe forever?
More safe, but not automatic. You still must secure your seed phrase, keep device safe, guard against phishing, malware, etc. Self-custody means you control all risk – good and bad.
What if I live in a country where regulation is weak—does that affect wallet vs exchange?
Yes. In countries like Nigeria or Uganda, regulation may shift and banks may block deposits/withdrawals from exchanges. Using wallet gives you more control because you are not dependent only on the exchange. But you still need to consider how you convert to/from local currency.
Should I move crypto off exchange immediately after buying?
Yes if you are holding it long-term. A recommended practice: buy crypto on exchange → withdraw to your wallet as soon as you can (especially if you don’t plan to trade it soon).
What about using decentralised exchanges (DEX) or other platforms?
DEXs reduce some risks of centralised exchanges, but they come with their own risks (smart contract bugs, liquidity risk). Self-custody wallet combined with careful protocol use is still the safest for long-term holds.
Can I lose crypto even if I self-custody?
Yes—if you lose your seed phrase, send to wrong address, fall for scam, or your wallet device fails and you have no backup. Self-custody shifts risk to you, so you must manage it.

Conclusion

For students and working-class people in Nigeria, Kenya, Ghana, Uganda or South Africa, the excitement of crypto is real. But along with opportunity comes risk—especially the risk of losing your savings because of one single point of failure: keeping all your crypto in an exchange.

By understanding why exchanges carry risks (lack of key control, hacks, withdrawals freeze, regulations), and by learning how to move your crypto into your own self-custody wallet, you can protect your assets. The best approach is:

Use exchanges for what they’re good at (buying, trading)
But move the majority of your crypto into your own wallet for safe storage
Learn wallet setup, backup your seed phrase, choose hardware wallet if possible
Keep emergency savings in local currency also
Stay informed about local banking/crypto regulations

In short: convenience is fine—but for long-term holdings, security matters more. You deserve to hold control of your own digital assets, not depend entirely upon an exchange.