Exchanges Beat Wallets Despite High-Profile Bankruptcies: Report

Research by imToken has found that users prefer centralized exchange custody over self-custodial wallet solutions wallets.

The report comes despite the recent collapse of crypto heavyweight FTX. According to the poll, 63% of respondents believe trading on exchanges is easier or less expensive than trading on wallets.

38% of Users Find Wallets Less Secure

Notably, 38% of users thought wallets were less secure than exchanges. They worry about being hacked (29%) or losing cryptocurrency by accident (18%). That said, more than 40% of the customers surveyed said they would spend up to $100 for a wallet to address problems with existing wallets.

However, more than 25% believe that most people will begin converting to self-custody at least five years from now. Likewise, a quarter of users surveyed think that even in ten years, most cryptocurrency users will continue to employ custodial solutions.

And the majority of poll respondents (51%) told imToken that they would choose a new wallet if it offered better security with multifactor authentication. Interestingly, smart wallets’ increased convenience appears to be less obvious. Only a small percentage of users interviewed deemed wallets to be more convenient than custodial alternatives. As 76% of respondents preferred centralized custody. 

FTX Collapse Didn’t Deter Users From Exchanges

The report reflects surprising user preferences despite a difficult last quarter for centralized crypto platforms. Before FTX-driven shockwaves hit the markets in Nov., a sizable section of the cryptocurrency industry was affected when 3AC collapsed in July 2022. Many well-known companies, including Deribit, Blockchain.com, and Voyager Digital, were among its creditors.

However, according to a previous study by Chainalysis and Bitfinex, the number of thefts and the total amount taken from centralized exchanges has decreased by around 58%. It has gone down from $972 million in 2018 to $413 million in 2021. In reality, the investigation discovered that Hodlers keep a significant amount of this cryptocurrency on centralized exchanges.