An exchange is a venue that matches buyers and sellers of crypto. Centralized exchanges run order books and usually hold customer assets in custody until you withdraw. Decentralized exchanges use smart contracts and pools so trades settle on-chain from wallets users control. Both are markets. The risk surfaces differ.
Why it matters
Exchanges set much of the visible price and liquidity for majors and alts. Fees, depth, listing quality, and withdrawal reliability decide whether a quote is tradable size or just a screenshot. Centralized venues add counterparty risk: hacks, insolvency, frozen rails, and opaque reserves. Decentralized venues add contract, oracle, and MEV risk instead.
Desk habit is to separate trading float from savings. Keep on an exchange only what you need for active books, and test withdrawals while the venue is calm. Marketing about insurance funds or proof-of-reserves helps within limits. It does not turn an IOU into a coin in your cold wallet.
Regulation and geography also matter. The same brand can offer different products by country, and a sudden compliance change can pause fiat or crypto rails. Read status pages and withdrawal histories when size grows. Pair venue choice with order book depth, not only with social reputation.
Exchange selection also includes operational details desks forget until stress: fiat deposit delays, stablecoin network fees, API rate limits, and whether the venue supports the chain you actually hold. A deep book on the wrong network is still the wrong book for your inventory.
Example
You buy Bitcoin on a large centralized exchange because the spot book is deep and fees are clear. After the trade, you leave only a small working balance and withdraw the rest to self-custody. If that exchange later slows withdrawals during a stress week, your savings stack is already outside the queue while the remaining float is sized for the risk you accepted.