Saving money in the bank and saving digital assets in your wallet are two different things. We spend money everyday and that's why we can not save it the way we save private keys. We don't access our private keys on a daily basis just like the way we will want to access money everyday. No matter how secretive you think the hidden place is, the more you access it, the more you are exposing it and its likely to be discovered.

Banks are criminals deriving profits from people's resources but it's still the best and safest way to store your fiat. It guarantees you rest of mind and gives you assurance irrespective of circumstances. Op, the hacker did not willingly returned the stolen assets, it was recovered according to report from the link you shared.

The main reason I see why most people trust government entities to save and guide their crypto is because of the hope that even if those funds are hacked and not recovered by the government, there are higher chances and possibilities of the government paying back lost funds, as there is also always customer deposit protection on funds under banks and government entities. Does such protection don't extend to crypto deposits? 

Already one guys mention the FTX incidents. I think if you know that you forgot the incident or you don't have idea about the FTX exchanger collapse.
Most of the people in crypto space surely know about the FTX incident. Once upon a time FTX was the  second largest exchanger in crypto space and we saw their ads on the most expensive places and we I know Bankman-Fried the CEO of FTX exchange was one of the quickest young successful man.
But the exchange are always have the questionable proof of reserve and in case of FTX that also proofed. So even if they have more protection that can useful for recovering fund but what will be the usages of the features on the protection when the institute will collapse or will be invisible?

Absolutely correct! This last part of your comment says it all.

Just last month, a high tech crypto guy's wallet was drained. That was a guy who's extremely knowledgeable in this space and also teaches wallet security but on the said day he allowed his emotion get the better of him. How it happened? He was contacted for a crypto job by a friend for a supposed site. Negotiations were ongoing and the project sent him a file to download and check certain stuff out. Unlike what he usually did, he would send that file to another device and download from there. That wasn't the case on the said day. He downloaded it immediately on the device he was using and on which he had some of his Web3 wallets. He lost every single coin on all the wallets on that device (his phone). We've to know that any single slip can ruin one in this space. Be guarded. That's the disadvantage of using a Web3 wallet (Noncustodial wallet) over Cex. If it were a Cex, I'm sure he wouldn't have lost his coins; especially if he had 2FA on it.

Yeah, the money, part of it, will be returned to the people, however, they could have much more in the perspective of today and how the Bull moves.
Hopefully, many out there would learn from the mistakes tips mentioned, made by both people and institutions alike.

If you have a coin on centralized exchanges, you risk losing it to hackers even though it might not be that instant because the exchanges send in and out of crypto to people that withdraw their coins from the exchanges and even though they do say they have a hot wallet and cold wallet, it's not always clearly indicated  or security reasons and as owner, you have to trust them but in crypto, you don't have to trust people until you verify.

For this, it's better you have your own wallet and it should be a cold hardware wallet where it doesn't get connected to internet. If your hardware wallet is/has connected to the internet, it doesn't mean you will loss your coins but there is an extra level of security a hardware wallet thy has never been connected to the internet gives you and that is a peace of mind instead of using the one you have connected to the internet, that way hacker can't reach you.

Trusting the storage of coins is definitely not worth it, except hacking, there are many other difficulties as blocking an account, then you will have to prove the origin of the funds. If we are talking about governments, then I understand that we are talking more about banks, which is no less safe than exchanges. But not everyone is ready to be responsible for storing their funds, someone is easier to keep their coins on the exchange and think that this is the safest place. Hackers are a separate topic for discussion, but I think that they most often choose large wallets for their attacks, private holders should not be very worried here.

Thanks to the decentralization of Bitcoin, we can have the privacy and freedom of holding our digital cash or asset in our custody without any interferences from third parties. Being the sole custodian and bank to your Bitcoin comes with it's own price, something that is normally left in the custody of third parties like Banks and exchanges. You must secure your private keys and seed phrase, otherwise your coins can either be lost forever or be stolen. If you're able to be knowledgeable about how to write or inscribe your seed phrase and hide them in different locations, then you're good in protecting the access to your coins in the blochchain.

Everybody will use what would get them the results in their heads.
However, remembering what matters most, the security and confidentiality, must be remembered and appropriately taken care of.

I am having a hard time understanding you here, when you say third parties, do you mean centralized exchanges and custodial services, because it is never safe to store your funds there. However, if you use a self custodial and open source wallet, and if you also run your own node, then you control your funds and your privacy and you don't depend on any third party service.