If we see some people saying that they are holding a large amount of Bitcoin on an exchange, I’m always surprised. Why are they holding their Bitcoin on an exchange when they are aware of what is happening to exchanges as they continue to collapse?For some people, I think it’s a lack of knowledge about privacy. Some people don’t even know the difference between a custodial wallet and a non-custodial wallet, so they just feel that keeping their Bitcoin on an exchange is safe.But anyone who has knowledge about privacy will likely try to move their coins off an exchange, unless they want to make use of the exchange for a specific purpose.

If they trade there very often, that's okay and easy to understand.

But if their sole purpose is to use the exchange as their personal wallet, maybe they don't even know it yet the risk that it has got.

Once these exchanges gets hack and collapses, that's when they will realize the risk of it.

I’ve really had enough of these exchanges they’re the bridgeheads and the enforcers for the bureaucrats who want to get their hands on the crypto sector. The crypto sector must, by definition, be FREE; freedom does not involve dealing with centralized entities and should not force people to compromise their integrity by using KYC systems. Bitcoin and the entire crypto sector rose from the ashes of the golden age of P2P, when networks like KAD, eMule, Torrent, and Napster ruled the roost and were sworn enemies of copyright. Copyright represents an abomination for the intellectual evolution of humankind.
Don’t give your funds to third parties.

A legally operating exchange definitely would not do that. Even if the reason for its closure is due to hacking, they would resolve all issues, including the withdrawal of users' funds from the exchange. Even if financial problems occur, at least payments could be made gradually by the exchange. They conduct legal business, not deliberately trying to scam. But if an exchange does shut down services and then disappears without any clarification, of course, that is a different case.

The use of exchanges to store our Bitcoin or other cryptocurrencies has never been a good option, the reasons being that they can face the risk of attack at any moment, and we have also been hearing of many of the cryptocurrency exchanges that have been attacked in recent times, and whenever an exchange is attacked, the investors face the risk of loosing their money. Exchanges can shot down for many reasons. When exchanges no longer have the expected number of customers either generally or within a place , they can shot down or withdraw their services, exchanges can also shot down because of tax rate, when they are not comfortable with the amount of tax they are paying, they can withdraw services. These are the demerits involved in using exchanges to store your Bitcoin, and other cryptocurrencies, and it becomes a thing of great concern, and something to consider before taking the decision of using exchanges for Bitcoin investment. Sometimes, not everyone will be able to recover their funds when exchanges shot down, so we should avoid the use of exchanges and focus on the use of non custodial wallet to ensure the safety of our investment.

We can't even debate the importance of self custody. It's not comparable with exchange that can shutdown unaware. But how does people lose their assets during exchange shutdown? Are they dead or what? AFAIK, when a legitimate exchange want to shutdown their operation, they usually give a notice and instruct their users to withdraw their assets to another platform or personal wallet. Of course, it's a different case with scam exchange but that's not what we are talking about here.

The challenge I have observed with some of the shutdown is inflated withdrawal fees. The withdrawal fees becomes very annoying and consume a significant amount from your assets. That's also lose of assets but it's still a different case. Regardless of whether they allow you to withdraw or not, keeping your assets in an exchange is not a great idea unless you're ready to lose them or part of them.