Get competent enough to trust yourself.
Discussion
Don't trust, verify
Good enough is better than the best despot.
I wish you could say that universally, but that's just not practical. Think about a 10 year old or an 80 year old. Do you really trust them to not lose their keys? Competence is ideal, of course, but my experience tells me that self-custody is not something most people will do, and maybe even can do.
A 10 yr old you trust with a small amount, that can be lost. Most 80 yr-olds will need trusted assistance, but still could self custody their savings, even if it's just a piece of paper. Today we probably don't have good enough schemes for that, but we should create them.
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Saying 100% of your stash should be self custodied is like saying this:
You should have no home fire insurance. Because that insurance company may go bust. Instead, you should be competent enough to ensure no fire ever starts in your house.
Your analogies likens custody with having insurance. Foolish
That is exactly what it is.
Insurance is not some mumbo jumbo legal definition. Insurance is an individuals cost-benefit analysis of their situation.
Lets say I have made 100x on my BTC. Moving say 10% of my stash to a custodian protects a portion of my wealth from an attack / mishap with my own seed phrase storage. If the custodian goes bust, meh. I still got my 90% of the best performing asset.
And it helps me sleep better, so less stress, and so less likely to fumble the seed phrase...
Diversification of stash location. Not a bad choice TBH. But corporations are not the only option. You can custody part of your stack with trusted family members. You can also custody some of their stack in return. Ensuring each other against catastrophe without involving strangers.