Self-Custody vs. Exchange Risk: A Cost-Benefit Matrix

"Not your keys, not your coins" is dogma, not always optimal. For large, long-term holdings, hardware wallets + multisig (e.g., 2-of-3 with different brands) beats any exchange. But active traders or small balances face real trade-offs: transaction fees, seed phrase vulnerability, and bridging complexity. We propose a decision matrix: Holdings >$10k & time horizon >1 year → mandatory self-custody. Trading frequency >10x/month → keep up to 10% on tier-1 exchanges (Coinbase/Kraken) with withdrawal whitelists. All others → split: 70% cold storage, 30% on exchange with 2FA hardware keys. Security isn’t binary; it’s layered and contextual.