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Following a string of headlines related to the FTX saga, exchanges have seen a mass exodus of users storing Bitcoin on their platforms. The United States-based exchanges have seen a particularly large knock, with many users withdrawing their Bitcoin.
According to information from on-chain data resource Coinglass, leading platforms including Coinbase, Binance, and Gemini are looking at as much as 80% Bitcoin balance reductions in the past 30 days.
Bitcoin movement: From exchange to self-custody
Amidst uncertainty in security and regulatory protocol as a result of the FTX explosion, users’ attention has been diverted to storing their cryptocurrency in other ways than on centralised crypto exchanges.
In response, there has been a massive more than $3 billion worth of cryptocurrency that has been moved from platforms to self-custodial services. Many users have looked to hardware wallets, such as Ledger and Trezor, to store their crypto assets offline. While leaders in the industry have warned of security of online platforms in the past, the FTX saga seems to have put a spotlight on the damage that can be caused with centralised storage. Over the course of the past week, most major exchanges have seen net withdrawals of Bitcoin – a decline in storage that doesn’t keep up with deposits as people buy digital funds from exchanges.
Gemini represents the largest reduction, with users withdrawals cumulatively coming to nearly 30,000 Bitcoin. Kraken, Binance, and Coinbase have seen a similar withdrawal rate. It’s predicted that this US-based exchange knock is aligned with both the FTX scandal as well as regulatory uncertainty in the country. Within the last week, regulatory bodies have announced that there will be a hearing to explore exactly what happened at the exchange with a call to extradite the former CEO Sam Bankman-Fried from the Bahamas where he has been alleged to be looking to flee to Dubai. According to the Chair of the U.S. House Financial Services Committee Maxine Waters, the FTX crash has not only posed an issue to traders who have been caught in the cross-fires but also to vulnerable users to used the platform to invest and store their funds:
“The fall of FTX has posed tremendous harm to over one million users, many of whom were everyday people who invested their hard-earned savings into the FTX cryptocurrency exchange, only to watch it all disappear within a matter of seconds.”