FTX Implosion Reminds Investors “Not Your Keys, Not Your Coins”

On-chain intelligence firm Glassnode reports record Bitcoin flows from centralized exchange wallets to self-custody following the collapse of cryptocurrency exchange FTX.

A record number of cryptocurrency holders are moving their funds out of centralized exchange wallets following the collapse of FTX and FTX US.

On-chain market intelligence company Glassnode says 106,000 Bitcoins moved from centralized exchanges to self-custody on Sunday”[f]Following the collapse of FTX. “

It said the number was only matched three times, in April 2020, November 2020 and June-July 2022.

However, it is debatable how much of this year’s current scare is beyond normal limits. While the Crypto Fear and Greed Index halved from 40 on Nov. 6 to 21 on Nov. 12, it was in the low 20s throughout September and October, and rose in May, June, and July. Roughly staying in the range of 6 to 12, when the price fell from around $40,000 to below $20,000 within six weeks.

Beyond that, Glassnode said that since Nov. 6, the shift to self-managed encryption has been “very dramatic across all groups.” Its data shows that token holders with balances below 1,000 BTC have much higher centralized exchange outflows than whales with larger balances.

There are nearly 10 times more “shrimps” with less than 1 BTC than 3,600 Bitcoin “whales”, and more than 20 times more “sharks” with Bitcoin balances between 10 and 1,000 BTC. Crabs with 1 to 10 BTC moved 13.5 times as many bitcoins to cold wallets.

Not your keys, not your coins

In many ways, those moving their crypto holdings from exchanges to cold wallets are simply following the very basic advice given by most cryptocurrency experts — including more than a few centralized exchange CEOs.

Binance’s Chanpeng “CZ” Zhao and MicroStrategy executive chairman Michael Saylor have been the most prominent voices lately warning that self-custody is much safer than keeping funds in exchange wallets.

Zhao called self-protection Nov. 13, “A Basic Human Right” about private cold wallets, linking to a two-year-old post he wrote on the subject, while Bitcoin maximalist Saylor at a conference a few days earlier express,”[i]In systems without self-regulation, custodians accumulate too much power, which they can then abuse. Saylor added that self-regulation via cold wallets is an important provider of “checks and balances,” Cointelegraph reported. But “not your keys, not your cryptocurrency” is something that has been suggested for years, especially by Bitcoin advocates and author Andreas Antonopoulos. Tesla CEO and Twitter owner Elon Musk warn That”[a]Any crypto wallet that won’t give you your private keys should be avoided at all costs,” back in 2021. Two Coinbase CEOs Brian Armstrong Kraken founder (and then-CEO) Jesse Powell advised people to self-custody their cryptocurrencies after Canada invoked emergency legislation during trucker protests in February.Powell Say:

“Please don’t fund causes directly from escrow wallets. I’m sure freeze orders are coming. Get out of non-custodial before sending.”

Information source: compiled by 0x information from COINMARKETCAP.Copyright belongs to the author, without permission, may not be reproduced

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