Confidence in centralized exchanges seems to be waning as Bitcoin flows into self-custody wallets at near-record levels.
Bitcoin investors have been increasingly moving their holdings to self-custody solutions following the collapse of the world’s second-largest crypto exchange last week.
On-chain exchange flow data is showing a surge in withdrawals to self-custody wallets, per analytics supplier Glassnode.
In a Nov. 13 post on Twitter, Glassnode reported that Bitcoin exchange outflows had hit close to historic levels of 106,000 BTC per month.
It further that this went on solely 3 different times — in April 2022 and November 2020, in addition as in June/July 2022. It also reported that the number of Bitcoin wallets receiving the asset from exchange addresses surged to around 90,000 on Nov. 9.
Exchange outflows are usually a optimistic sign that BTC is being hodled for the future. However, in this scenario, it seems to be the results of loundering confidence in centralized crypto exchanges.
Glassnode commented that outflows have resulted in “positive balance changes across all case cohorts, from shrimp to whales,” before adding:
“The failure of FTX has created a very distinct change in #Bitcoin holder behavior across all cohorts.”
Since Nov. 6, when the FTX fiasco began, balance changes have increased across all BTC case sizes with “shrimps” that have but one coin increasing by 33,700 BTC. Whale wallets with more than 1,000 coins have seen a rise of 3,600 BTC indicating that the self-custodian push is happening across the board.
Industry leaders are now commencing to advocate self-custody solutions because the phrase “not your keys, not your coins” bears more weight than ever before.
On Nov. 13, Ethereum educator Anthony Sassano said that crypto holders shouldn’t be storing their assets on centralized exchanges unless their actively trading large amounts.
MicroStrategy’s michael Saylor told Cointelegraph in an interview that self-custody prevents centralized third parties from abusing their power.
Glassnode also reported that stablecoins, several of that destabilized last week, are flowing onto exchanges at increased rates over the past week.
Nov. 10 saw more than $1 billion in stablecoins inbound on centralized exchanges. the total stablecoin reserve across all exchanges it tracks reached a new all-time high of $41.2 billion, it added.
“The echos of the FTX collapse can probably act to reshape the business across several sectors, and shift the dominance, and preference for trustless vs centrally issued assets,” it ended.
( Martin Young, Cointelegraph, 2022 )