Following the failure of the second-largest cryptocurrency exchange in the world last week, investors in bitcoin are rapidly transferring their holdings to self-custody options.
According to analytics company Glassnode, on-chain exchange flow data shows a spike in withdrawals to self-custody wallets.
Glassnode said that Bitcoin exchange outflows have reached close to historic levels of 106,000 BTC per month in a post on Twitter on November 13.
It was also mentioned that this had only occurred three other times, in April 2022, November 2020, and June/July 2022. It further stated that on November 9, there were roughly 90,000 Bitcoin wallets receiving the asset from exchange addresses.
Following the collapse of FTX, #Bitcoin investors have been withdrawing coins to self-custody at a historic rate of 106k $BTC/month.
— glassnode (@glassnode) November 13, 2022
This compares with only three other times:
- Apr 2020
- Nov 2020
- June-July 2022https://t.co/92aYVYU4Yt pic.twitter.com/em7CsDBWUf
Exchange outflows typically indicate that BTC is being held for the long term, which is bullish. In this instance, though, it seems to be the outcome of waning trust in centralized crypto exchanges.
As Glassnode noted, "positive balance changes across all wallet cohorts, from shrimp to whales" have been brought about by outflows, he continued:
“The failure of FTX has created a very distinct change in #Bitcoin holder behavior across all cohorts.”
Since the FTX scandal broke on November 6, balance changes have risen for all Bitcoin wallet sizes, with "shrimps" (wallets with fewer than one coin) seeing an increase of 33,700 BTC. The surge of 3,600 BTC in whale wallets with more than 1,000 coins shows that the self-custodian movement is spreading to all markets.
Leaders in the industry are increasingly pushing for self-custody options as the adage "not your keys, not your coins" has more significance than ever.
On November 13, Ethereum expert Anthony Sassano remarked that unless they are regularly trading significant quantities, cryptocurrency owners shouldn't be holding their assets on centralized exchanges.
According to Michael Saylor of MicroStrategy, self-custody stops centralized third parties from misusing their authority.
Stablecoins, several of which destabilized last week, have been flooding exchanges at higher rates lately, according to Glassnode.
Stablecoins worth more than $1 billion arrived on controlled exchanges on November 10. It said that the total stablecoin reserve across all exchanges it monitors hit a fresh record high of $41.2 billion. It concluded with:
“The echos of the FTX collapse will likely act to reshape the industry across many sectors, and shift the dominance, and preference for trustless vs centrally issued assets.”
