As Bitcoin flows into self-custody wallets at near-record levels, trust in centralized exchanges appears to be eroding.
Following the collapse of the world’s second-largest crypto exchange last week, bitcoin investors have been increasingly shifting their holdings to self-custody solutions.
According to analytics provider Glassnode, on-chain exchange flow data shows an increase in withdrawals to self-custody wallets.
Glassnode reported on Twitter on November 13 that Bitcoin exchange outflows had reached near-historic levels of 106,000 BTC per month.
It went on to say that this has only happened three times before: in April 2022, November 2020, and June/July 2022. On Nov. 9, the number of Bitcoin wallets receiving the asset from exchange addresses increased to around 90,000, according to the report.
Outflows from exchanges are typically a bullish sign that BTC is being held for the long term. However, in this scenario, it appears to be the result of waning trust in centralized cryptocurrency exchanges.
Outflows, according to Glassnode, have resulted in “positive balance changes across all wallet cohorts, from shrimp to whales,” before adding:
“The failure of FTX has created a very distinct change in #Bitcoin holder behavior across all cohorts.”
All Bitcoin wallet sizes have seen an increase in balance changes since the FTX debacle started on November 6, with “shrimps” (wallets with fewer than one coin) seeing the largest increase of 33,700 BTC. 3,600 BTC more have been added to whale wallets with more than 1,000 coins, showing that the self-custodian push is spreading to all wallet types.
As the adage “not your keys, not your coins” has more significance than ever before, industry leaders are now beginning to support self-custody solutions.
Anthony Sassano, a teacher of Ethereum, stated on November 13 that cryptocurrency owners shouldn’t store their assets on centralized exchanges unless they are actively trading large amounts.
Self-custody keeps centralized third parties from abusing their power, according to MicroStrategy’s Michael Saylor in an interview with Cointelegraph.
Glassnode also reported that stablecoins, many of which were destabilized last week, have been flooding exchanges at an increasing rate in the last week.
On November 10, over $1 billion in stablecoins arrived on centralized exchanges. It added that the total stablecoin reserve across all exchanges it monitors has reached a new all-time high of $41.2 billion.
“The echoes of the FTX collapse will most likely act to reshape the industry across many sectors, shifting dominance and preference for trustless vs centrally issued assets,” the report concluded.