After the FTX fiasco, Bitcoin Holders Turn to Self-Storage
As a result of last week’s FTX crash, Bitcoin and cryptocurrency investors are growing more suspicious of centralised exchanges.
The actions are scarcely unexpected given that FTX, the second-largest exchange in the world, was thought to be almost indestructible. The exchange’s failure demonstrates that it was not too large to fail, particularly if it had sufficient reserves to support the bank run that ensued.
In the last week or two, Bitcoin investors have shifted their holdings from exchanges to self-custody wallets.
According to analytics firm Glassnode, the most significant increase in on-chain wallet activity has ever been seen.
Bitcoin Hodlers Skeptical About CEXs
Glassnode announced in its November 14 issue of ‘Week On-chain’ that exchanges had seen one of the greatest net decreases in aggregate BTC balance in history. In just seven days, their BTC balance decreased by 73,000.
Only in April and November 2020, June/July 2022, and now November 2022 have monthly outflows of more than 106,00 BTC been recorded.
It made a similar discovery on Ethereum, noting that over 1.1 million ETH had left centralised exchanges in the previous week. It was the greatest monthly fall since September 2020, when ETH demand soared during ‘DeFi Summer’
Even though several of the larger exchanges, including as Binance and Kraken, provide proof-of-reserves, crypto investors remain wary of them.
Stablecoins, which have been flooding into exchanges over the last week or two, have seen the opposite trend. Last week, stablecoin reserves across all exchanges reached a new all-time high of $41 billion.
The reserves and supply of Tether (USDT) and Circle (USDC) have decreased somewhat, but Binance USD (BUSD) has climbed as the exchange consolidates its reserves.
Glassnode discovered that $4.63 billion worth of these stablecoins were extracted from smart contracts each month.
“This acts to highlight how acute the demand for immediate dollar liquidity has become.”
As crypto is converted back into stablecoins, the demand for the asset has surged with the strength of the dollar.
Rising Bitcoin Wallet Balances
All cohorts of BTC wallet users, from shrimps to whales, had balance rises, according to the survey.
This week alone, smaller wallets with less than one coin added 33,700 Bitcoin. This resulted in a monthly balance gain of 51,400 Bitcoins, the second-largest in the history of the cryptocurrency.
The crypto markets have stabilised somewhat over the previous day or two. The entire market capitalization reached $880 billion at the time of writing, a little increase from the previous day.
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