[massaman_yams]

This is a line of thinking akin to goldbuggery in the traditional investing world; it's the same kind of mindset that leads to cash stuffed underneath mattresses and basements full of nonperishable goods. It is, in a word, paranoid, and doesn't represent a balanced assessment of risk factors.

Granted, risk is higher with cryptocurrency given its infancy; I won't dispute that. But if we trust brick & mortar banks to have adequate security policies and practices to deal with fiat currency, then the amount of trust we need to place in a competent exchange isn't multiple orders of magnitude higher than that. Just as there are security policies to mitigate risk in the world of cash, so are there policies to mitigate risk in the cryptocurrency world.

Maybe the risk with an exchange is one order of magnitude higher at the moment vs fiat; that seems like a reasonable amount. But 2-3+? No, particularly given the risks already present for fiat currency. And while we're at it, consider hardware failure risk if you're storing your own wallet files. What's an average failure rate for a storage device per year? 1-3%? Great, I'm sure you have backups. Not every user can be bothered, but any competent exchange will. Or - on the crypto side - what amount of value would be at risk due to an event like a hard fork? That's a risk at the currency level, not at the wallet/key level.

The overwhelming majority of businesses don't live or die based on the opinions of the paranoid; they succeed or fail based on the opinions of the average customer.