Yes, the crypto people got a lot of things wrong. One is the idea that you have to trust banks. You don't. There's a whole system in place that protects us from banks, or anybody else, behaving badly. It's called 'civilisation'.
Do you think bank insurance is free? You seem to think crypto can't have insurance or maybe that it'll be costly while ignoring that bank insurance is something you are paying for. It's not free and the bank isn't doing you a favor.
Sure that's the point. Individuals can make a judgement call over who they think is least likely to lose their keys, themselves or Coinbase. Many of those crypto "banks" are insured.
This is a very different risk proposition compared to trusting a bank. If the bank gets compromised, it's the bank's problem, not mine.