What are risks associated with storing Bitcoin on exchanges?

Storing Bitcoin on exchanges presents significant risks primarily due to the potential for hacks and the possibility of exchange closures. Exchanges, by their nature, are centralized platforms that manage large amounts of customer funds and information. This centralization can make them attractive targets for cybercriminals seeking to exploit vulnerabilities in security systems.

When an exchange is hacked, it may result in substantial financial losses for users, as funds stored on the exchange may be stolen. Additionally, if an exchange closes abruptly—whether due to financial instability, regulatory issues, or other unforeseen circumstances—users may find themselves unable to access their funds, which can lead to a total loss.

While other options might suggest advantages or protections, they do not accurately reflect the inherent risks associated with keeping Bitcoin on exchanges. Understanding these risks is crucial for Bitcoin holders, as it helps inform decisions about secure storage solutions that may provide greater control and security over their assets.