Centralized Exchange (CEX)

A centralized exchange (CEX) is a company that operates as a custodian, order book, and matching engine for cryptocurrency trades. Coinbase, Binance, Kraken, Cash App, and a long tail of others. You deposit BTC; they hold it; you trade on their internal ledger; you withdraw if and when they let you.

What CEXs are good at:

• Liquidity. Major CEXs match hundreds of millions to billions of dollars of daily volume, so you can buy or sell large amounts without moving the price significantly.
• Fiat on-ramps. Bank transfers, debit cards, and other off-ramp infrastructure that decentralized alternatives can't match.
• User experience. Polished apps, customer support, and integration with other financial services.
• Trading features. Limit orders, futures, options, margin - the full traditional-finance toolkit.

What CEXs are not:

• Where you should keep Bitcoin you actually want to own. A CEX balance is a claim on Bitcoin, not Bitcoin itself. The exchange's solvency, custody practices, and regulatory good standing are all between you and your money.

The historical record on CEXs failing is long and continuing: Mt. Gox (2014), QuadrigaCX (2019), Celsius/BlockFi/Voyager/Genesis (2022), FTX (2022). The 2022 contagion alone destroyed tens of billions in customer balances. See Counterparty Risk for the broader framing.

The pragmatic approach: CEXs are useful on-ramps. Use one to convert fiat to BTC. Withdraw to a self-custody wallet (ideally a hardware wallet) for any meaningful amount. Don't treat the exchange balance as savings.

See Decentralized Exchange (DEX) for the non-custodial alternative.