Security breaches and attacks show the risks of holding Bitcoin on centralised exchanges.
One analyst said maintaining BTC on exchanges causes price declines.
Scope Markets Kenya’s Rufas Kamau discussed why holding BTC on an exchange lowers its price.
Kamau thinks buying BTC on exchanges is like buying an IOU, or “paper Bitcoin.”
The analyst said exchanges discourage BTC withdrawals with excessive costs.
Staking services on exchanges incentivize BTC storage.
According to Kamau, exchanges sell the Bitcoin they control to other customers while the IOU owner earns a yearly dividend on their BTC.
Kamau argued that investors who store BTC on exchanges incur a deficit because it enables exchanges to “print” Bitcoin; as supply rises, price falls.
He also recommended Bitcoin users to keep their assets off exchanges, calling it the “logical thing to do”
Many loved and shared Kamau’s Twitter thread, but not everyone agreed with him. Twitter user Koning Marc called the claims “wild guesswork at best” Felipe Encinas tweeted that exchanges would be able to short BTC without it, which “can’t happen.”
Crypto exchanges didn’t deny this was happening at some. Eric He, head of LBank, said exchanges that do this would be punished. he said
The market will punish exchanges who sell users’ Bitcoin by making it impossible to buy it again. Such deals are doomed.
Digital asset exchanges that are prospering and increasing are “solid crypto believers” who believe BTC can approach $100,000 and have been purchasing more instead of selling other people’s coins, he said.
Binance chimed in. A Binance official informed Cointelegraph that exchanges can’t shift users’ cash without permission. Within Binance, they say the business doesn’t take positions and that “users’ crypto assets are safely housed in offline, cold storage facilities.”
