Self-custody is key during extreme market conditions: Here’s what experts say

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The ongoing crisis of crypto-lending and the associated crypto market downturn once again underscores the importance of self-guarded or “real” ownership of cryptocurrencies by its holder, according to several industry experts.

In June, the cryptocurrency market cap fell below the $1 trillion mark, with Bitcoin (BTC) nearing its worst monthly loss since 2011. It remains to be seen whether crypto lending will survive the current crypto winter. However, many industry executives agree that investors can protect their assets forever by simply transferring them to self- or non-custodial portfolios.

It is crucial to remember that crypto financial service providers such as Celsius or Babel are centralized finance (CeFi) platforms, as opposed to decentralized finance (DeFi) applications, according to Yves Longchamp, head of research at Swiss crypto bank Ciba.

“Based on this evidence, CeFi platforms need better regulation with a focus on risk management. It is difficult to regulate DeFi because you cannot put a smart contract in jail or simply shut down the DeFi application,” Longchamp said in a statement to Cointelegraph on Wednesday.

The executive said that one way to regulate the overall crypto market is to primarily regulate the crypto user by providing education and investor protection tools along with trusted, independent source products, adding:

“In the spirit of blockchain, self-management is key: holders of cryptocurrency must hold their coins in unsecured wallets. If the user is to make smart decisions, he must be well aware of the risks he is taking.”
Longchamp also argued that algorithmic stablecoins like TerraUSD (UST) are “unstable” and “should be avoided.” He said that CeFi should focus on transparent, asset-backed stablecoins.

According to Brian Norton, chief operating officer of MyEtherWallet, crypto investors now have enough tools to realize that they do not have to rely exclusively on CeFi to conduct trades and mitigate risk.

Norton noted that code winters provide time and opportunity for people to learn how to do self-save, adding:

“If you rely exclusively on centralized platforms, even when the returns are high, you still give up a significant amount of control over your digital assets. […] Self-custodianship is what cryptocurrencies were built for, and what we’re seeing now is not the case. unusual.”
Crypto self-preservation is about allowing consumers to have complete control over their keys and the fate of their cryptocurrency, according to Adam Lowe, chief innovation and product officer at Arculus crypto wallet.

RELATED: Non-custodial Bitcoin wallets are not custodial, says exec behind Trezor wallets

“Self-sovereignty supports balance and self-regulation, and is beneficial to the entire digital asset ecosystem,” Lowe said in a statement to Cointelegraph.

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