Following the failure of the world’s second-largest cryptocurrency exchange last week, bitcoin investors are increasingly transferring their holdings to self-custody options.
According to analytics provider Glassnode, on-chain exchange flow data shows a spike in withdrawals to self-custody wallets.
Glassnode reported that Bitcoin exchange outflows had 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 also stated that on November 9, roughly 90,000 Bitcoin wallets received the asset from exchange addresses.
Exchange outflows typically indicate that BTC is being held for the long term, which is bullish.
In this instance, though, it seems to result from 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.
“The failure of FTX has created a very distinct change in #Bitcoin holder behaviour across all cohorts,” he stated.
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 increase of 3,600 BTC in whale wallets with more than 1,000 coins shows that the self-custodian push is spreading to all markets.
Leaders in the industry are now 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 said that cryptocurrency owners shouldn’t be storing their assets on centralized exchanges unless they actively trade large amounts.
According to Michael Saylor of MicroStrategy, self-custody stops centralized third parties from abusing their authority.
Stablecoins, many of which destabilized last week, have been flooding exchanges at higher rates lately, according to Glassnode.
Stablecoins worth more than $1 billion arrived on centralized exchanges on November 10. It added that the total stablecoin reserve across all exchanges it monitors hit a new record high of $41.2 billion.
“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,” it concluded.