As Bitcoin enters self-custody wallets at nearly record levels, confidence in centralized exchanges looks to be eroding.
Following the failure of the second-largest cryptocurrency exchange in the world last week, investors in Bitcoin BTC tickers down $16,436 are progressively 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 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.
— glassnode (@glassnode) November 13, 2022
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 grown for all sizes of Bitcoin wallets, 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 the total stablecoin reserve across all exchanges it monitors hit a fresh record high of $41.2 billion.
The report stated that “the ripple effects of the FTX collapse will certainly act to restructure the market across many sectors and shift the dominance, and preference, for trustless vs. centrally issued assets.”