What is Counterparty risk?
The risk that the other side of an arrangement fails to deliver — an exchange, a custodian, a lender.
Bitcoin held in self-custody has no counterparty risk by construction. Every other arrangement reintroduces it, in exchange for convenience, yield or regulatory access.
The repeated pattern of exchange and lender failures is not evidence that custody is always wrong. It is evidence that counterparty risk is real and is routinely priced at zero by people who should know better.
Related terms
Custodial
An arrangement where a third party holds the keys and you hold a claim against them.
Keys & custodyNot your keys, not your coins
The maxim that coins held by a third party are that party's coins and your claim against them.
MarketsSpot Bitcoin ETF
An exchange-traded fund holding bitcoin directly, giving regulated exposure without the holder ever touching…
This definition is part of the Bitcoin Logical glossary. For the fuller explanation, start with Learn, or see the live numbers on The Bitcoin Signal.