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

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

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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.”

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@glassnode

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:  Hex Team Offered Me 10BTC Bribe - Andreas Antonopoulos Claims

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.

Author

  • InfomediaNG

    The Infomediang Team comprises a group of researchers, data analysts, and financial experts who closely follow government policies and spending. Our passion lies in empowering people to make informed decisions about their investments by simplifying data for easy understanding. Find us @infomedia_ng on X.

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