Crypto Outflows to Self-Custody Increases on Exchange After FTX Collapse

Last updated on May 17th, 2023 at 12:05 pm


The movement of bitcoin and other cryptocurrencies to self-custody by holders reached a historic level a few days after the collapse of FTX.

Data insight provider for digital assets glassnode tweeted that withdrawals from crypto exchanges to self-custody wallets surged by a record that has only been seen three times since 2020.

“Following the collapse of FTX, Bitcoin investors have been withdrawing coins to self-custody at a historic rate of 106k $BTC/month.”


According to the data analytics firm, the only times the kind of huge withdrawals were witnessed were in April 2020,  November 2020, and June-July 2022.

Significance of the outflows

Outflows of cryptos to a self-custody wallet is a sign that crypto enthusiasts are most likely to hold for the long term.

However, the latest spike may be a result of the shady ways in which the founder of the formerly second largest exchange Samuel Bankman-Fried SBF handled the financial management of the multi-million dollar crypto firm and its disappointing collapse.

As such, people who believe in crypto future are devising ways to secure their digital assets using non-custodial methods than keeping them in the custody of an exchange.

Also Read:  Profitable Investment: The Complete Guide to Crypto Business Ideas

Also known as a non-custodial wallet, self-custody gives you control over your digital assets.

It is like taking off your assets from the crypto exchange (custodial wallet) and telling them, “Hey, I can safely keep my assets”.

In essence, a self-custody wallet allows holders to store their private keys, allowing them to securely access their blockchain-based assets.

Each private key corresponds to a public key, also known as the wallet address. The pair of public and private keys are used together to transact on blockchains.” – Linen Mobile says in a blog post.

CZ Advocates Self-custody of crypto assets

Similarly, the rubble in the crypto caused by the sudden collapse of FTX exchange has prompted industry leaders to encourage traders and holders to embrace self-custody wallets for the safety of their assets.

Specifically, the founder of Binance Changpeng Zhao or CZ tweeted that “Self custody is a fundamental human right” advising the community “do it right”.

Corroborating CZ’s advice, the executive chairman of MicroStrategy executive Michael Saylor says self-custody comes with a lot of merits given the current market environment.

According to him, self-custody prevents powerful actors from corrupting the network and its participants.

“In systems where there is no self-custody, the custodians accumulate too much power and then they can abuse that power.”

After the collapse of FTX which resulted in the downfall of FTT token price from over $22 to $2, industry leaders expressed concerns over the trust of traders in the crypto exchange.

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