Recently, while organizing the history of the crypto market, I discovered a rather alarming phenomenon— the frequency of exchange collapses is much higher than most people imagine. Many focus only on price fluctuations, but overlook a more deadly risk: where your funds are stored might be more important than which coin you buy.

According to data, there are about 670 active cryptocurrency exchanges, but many have also gone bankrupt. Just thinking about it is a bit frightening—Mt. Gox, FCoin, FTX, Bittrex… these once-star exchanges, some hacked, some embezzling funds internally, and others victims of regulatory storms.

What’s most impressive is the FTX incident. In November 2022, this once the second-largest exchange in the world declared bankruptcy in less than two weeks. Reports revealed that its related companies owed up to $8 billion, most of which were illiquid tokens. When problems arose, the funding chain immediately broke. Later, it was discovered that the exchange had diverted customer funds into high-risk investments, which was a betrayal of user trust.

Analyzing these collapses, there are mainly two reasons. One comes from the exchange itself—security vulnerabilities exploited by hackers, founders embezzling funds, poor management mechanisms. The other comes from external factors—regulatory storms, market bear markets causing trading volume to plummet.

So how to choose an exchange? First, safety must come first. Check the exchange’s security record, whether it is licensed to operate, and if it has risk reserves. Only then consider trading fees, the number of coins, and user experience. Never use an unknown small exchange just to save 0.01% in fees; the risk is simply not worth it.

Currently, more stable large exchanges in the market perform well in liquidity, security, and variety of coins, making them worth prioritizing. If you’re worried about centralized exchange issues, you can also try decentralized exchanges. For those interested in trading derivatives, regulated contract brokers are also an option, as they are subject to stricter financial regulations and have better fund segregation measures.

Finally, a reminder: if you are unfortunate enough to face an exchange bankruptcy, whether you can recover your funds mainly depends on the legal framework and liquidation procedures of that exchange. Some can return a proportion of funds, but it may take a long time. For major cases like FTX, which collapsed in November 2022, compensation plans are still ongoing. So, choosing an exchange really cannot be careless—one wrong choice might take years to recover from.