Recently, I’ve been organizing cases of virtual currency exchanges shutting down over the years, and I’ve noticed a pretty sobering phenomenon—the risk of exchange collapse is often greater than the losses caused by price fluctuations.

Speaking of which, many people enter the crypto space prepared to withstand high volatility, but what truly catches people off guard is the collapse of exchanges. This isn’t a black swan event; it’s a normal occurrence that happens every year. I’ve roughly compiled a list of well-known exchanges that have gone under over the years, such as MT.Gox in 2014, Yes-BTC in 2015, FCoin in 2020, the exchange that was once the second-largest in the world in 2022, and the U.S. exchange that filed for bankruptcy in 2023, among others. How did these exchanges fail?

The story of MT.Gox is the most classic—founded in 2010, it once became the world’s largest BTC exchange, but in 2014 it was hacked, losing 850,000 BTC directly. Some exchanges failed due to internal personnel embezzlement, management chaos, or because of regulatory crackdowns and market downturns causing revenue to plummet. Behind the wave of cryptocurrency collapses, there are either security vulnerabilities, improper management by founders, or external regulatory pressures.

Since so many exchanges have had issues, how can you choose to avoid pitfalls? I think the most critical factor is security. No matter how cheap the fees are or how many coins are available, if security isn’t guaranteed, it’s all pointless. Check whether the exchange has proper licensing, whether it has undergone third-party audits, and if it has a risk reserve fund. Only then consider fees, trading speed, and the number of supported coins.

Currently, the most globally comprehensive and strongest exchanges are still the large centralized ones, which have advantages in security, liquidity, and user base. If you still have concerns about centralized exchanges, you can consider decentralized exchanges, which may not offer as smooth an experience but at least give you full control over your funds. Additionally, there are some compliant derivatives trading platforms that also offer cryptocurrency trading services and are regulated by multiple authoritative agencies.

The final advice is—when choosing an exchange, don’t be tempted by small savings; security should always come first. Looking at the cases of cryptocurrency failures, it’s clear that a wrong decision can cost you several years’ worth of gains.