From Mt. Gox to FTX, exchanges have repeatedly collapsed through fraud, poor risk management and hacks. The pattern keeps repeating.
Exchanges hold enormous customer funds with opaque risk controls and limited oversight, creating a tempting target and a fragile structure.
Customers bear all the downside when an exchange fails, but the platform captures the upside while it operates. That asymmetry is the core problem.
If you do not hold your keys, you are exposed to the solvency and honesty of the platform. There is no way to fully eliminate that risk while funds sit on an exchange.
Use exchanges to trade, then withdraw. The history of exchange failures is the strongest argument for self-custody there is.