Is a question about the difference between Bitcoin Wallet and Bitcoin Exchange in-topic here?

Question

I would like to ask the following question on this site:

---

"What's the difference between a Bitcoin Wallet and a Bitcoin Exchange"

I want to invest a small amount of money in Bitcoin. Reading this, I discovered that one should create a Bitcoin Wallet before buying Bitcoins on a Bitcoin Exchange such as Coinbase or Kraken. I don't understand why I should do that, isn't enough to download the Coinbase app, for example? Also, the link says that

While exchanges offer wallet capabilities to users, it’s not their primary business. Since wallets need to be kept safe and secure, exchanges do not encourage storing of Bitcoins for higher amounts or long periods of time. Hence, it is best to transfer your Bitcoins to a secure wallet.

What's the reason for that? It seems very weird to me. If I buy stock options, no one would object to me keeping them invested for years. Then why can't I leave my investment on a Bitcoin Exchange for a long period? Do I risk that the Exchange goes bankrupt or something like that?

---

Your help page says that investment advice is off-topic here, but I don't think this is precisely investment advice, though it is of course tangentially related to that.

Answer 1

I would say this is on topic, as an answer would cover fact-based, technical differences between a wallet and an exchange. The question relates to Bitcoin and crypto, and does not require opinion based answers.

Answer 2

What's the difference between a Bitcoin Wallet and a Bitcoin Exchange

So the diffrence is,Exchange provides you trading option where you can trade your BTC whenever you feel like its profitable for you. And Bitcoin Wallet is a software program which stores btc address where bitcoin are stored. You can store your btc in exchange wallet for as long as you want, there wont be any restriction.

exchanges do not encourage storing of Bitcoins for higher amounts or long periods of time

This is because of Pvt key associated with each of your bitcoin address. Exchange have to take care of each users private key which is very risky for them because of security reasons. So they recommend you to keep your BTC in your cold wallet if you are goin to HODL so that you are responsible for your btc pvt key.

 If I buy stock options, no one would object to me keeping them invested for years

There is diffrence between Stock and cryptos. If someone hack your exchanges and took all of their pvt key than you cryptos are gone. There is no way you can bring them back. But in case of Stock the case is diffrent. Your record is kept secure in some database of bank or companies.

So now you might be thinking Crypto world is insecure

Its not insecure, but its decentralized. You can do P2P transactions with out any restriction, without any limit and you tranasction is safe,secure and faster than any of the traditional way.