According to statistics, the Bitcoin supply controlled by individuals outside of exchanges has been rising steadily for nearly three years.
Early this morning, on the 15th of December, 2022, a Reddit user posted a glass node graph depicting the percentage of Bitcoin held off exchanges since 2013.
— Bitcoin EDU (@BitcoinEdu) December 15, 2022
The graph marks 2020 as the year the trend reversed, with more and more Bitcoin having gone into exchanges before then. However, Bitcoin supply has steadily begun to climb back into individual wallets ever since.
According to the graph, the figure exceeds 88%, an amount of bitcoin not held outside of exchanges since before 2018.
This development comes at a time when more and more people are being encouraged to self-custody their bitcoin. The alleged rug pull at FTX and the exchange’s complete collapse have released a wave of FUD surrounding exchanges into the cryptocurrency market. “Not your keys, not your coins,” has become a stark reality for crypto users who have been lulled into a sense of security in the exchanges. But the wave did not start with FTX.
For many, the 2022 crypto crash began with Terra and Luna, and the giant collapse in May decimated nearly $500 billion worth of crypto in a fortnight. Celsius Network, the popular crypto lender, crashed as a direct result of the TerraUSD meltdown, taking customers’ deposited bitcoins along with it in June. In July, right after that, Voyager Digital, the crypto lender and broker, filed for bankruptcy. FTX was even in the process of bailing out Voyager when it too collapsed. BlockFi, the cryptocurrency bank that was bailed out by FTX founder Samuel Bankman Fried, known popularly as SBF, went bankrupt shortly after FTX as well.
The current efflux is a predictable and even justified response to a series of attacks that have hit well-known, reliable exchanges and taken customer investments with them. And analysts believe the outflow is not stopping any time soon. Binance, for example, saw over $6 billion in withdrawals on December 13th. While Binance’s reserves may enable them to weather the storm if uncomfortable, other less robust exchanges may find that their profits are too significantly impacted to survive.
Reactions to the efflux are cautious, despite many supporting self-custody. There could be a massive increase in Bitcoin circulation and more direct Bitcoin transactions. Uncertainty still exists regarding what this means for the price of Bitcoin and the overall cryptocurrency market.