You could still hold key to your assets and still lose your funds hypothetically, this could be possible for a centralized based wallet, where written programmed codes can be rewritten which can alter all previous programmable features by either a project developer allowing them to have control over all your asset which includes imposing limits on a users wallet, this has not been mentioned in any crypto-based self custodial wallet but the probability of such reoccurring act is quite possible if such project governing policies are bridged, self custody increases trust, however, to sell your bitcoin to fiat you would need a centralized exchange which makes them indispensable in the crypto space.
The purpose of decentralization is defeated if you're having problem moving your fund, bitcoin aims at giving users sovereign right over their assets, however, your bitcoin in centralized exchanges isn't under your full custody, the recent Celsius exchange withdrawal halt shows how important it is to flexibly control your keys those caught in this mess would have no choice but to wait pending when transaction activities will be back to normal.
Private keys
Protecting your bitcoin means owning your own set of private keys which can only be accessed by you, these keys allow you to sign and verify transactions they are represented in a 12-24 word seed phrase while private keys grand access to your wallets fund they must be guarded with care storing your keys online can as well get your funds exposed securing your bitcoin using a hardware drive have proven to be the most secure means of protecting your assets.
Overall we must as well know with great power comes great responsibility to protect your assets both online and offline require understanding why self-custody is important in controlling our funds, knowing however we still need a centralized exchange to transaction our crypto to fiat, bitcoin a decentralized digital asset isn't controlled by any government agency breathing freedom to humanity.