The bear market has inspired the little guy to accumulate vast amounts of Bitcoin (BTC). The number of wallets holding 1 BTC or more recently hit new highs, while those with 10 BTC or fewer are setting accumulation records.
However, to what extent are these newly minted “wholecoiners” taking custody of their private keys? Has the recent spate of insolvency among centralized exchanges (CEX) encouraged Bitcoin enthusiasts to move their Bitcoin into cold storage, removed from third-party risk?
For Checkmate, the lead analyst at Glassnode, the data would point to this result. “Overall it looks like at least a short-term movement towards self-custody.” Checkmate told Cointelegraph. “Partly out of concern for CEX solvency.”
“Last few weeks have been the largest monthly decline in exchange balances in history, peaking at 177.9K BTC/month in withdrawal volume.”
He also shared that withdrawals from exchanges have set new records, with users taking thousands of Bitcoin off exchanges. The spike is shown in red on the graph.
Customers withdrawing Bitcoin from exchanges has impacted exchange supply. The number of Bitcoin available on exchanges has “fallen to its lowest % of supply (11.99%) since December 2017. This means pretty much every coin that flowed in over the last 12 months has flowed out,” Checkmate observed.
Plus, according to Glassnode data, withdrawals from exchanges accounted “for ~30% of all transactions in recent weeks.” That would suggest an overall shift to self-custody: Bitcoin is being sent to hot or cold wallets.
When Bitcoin investors "withdraw" from exchanges, it can be to an offline hardware wallet, sometimes called cold storage, or an online wallet (hot). Hardware wallets or signing devices are tools that manage a user’s cryptocurrency wallet and private keys. Popular hardware wallets include Ledger, Trezor and ColdCard; hot wallets include Blue Wallet or Exodus Wallet.
Josef Tětek, Bitcoin analyst at Trezor — one of the world’s largest hardware wallet providers — has observed a considerable drive in sales in the past month. “We have seen a dramatic rise in interest in Trezor devices and new Trezor Suite downloads,” Tětek told Cointelegraph. “Our sales are hitting historic highs over the past few weeks.
“Normally, a bear market is rather a quiet period for us, so this uplift in sales only shows how big of an impact the collapses of FTX and BlockFi have on people's trust in custodian services.”
Cointelegraph had previously reported that Trezor benefited from a 300% increase in hardware sales due to the FTX fiasco. That's despite the price of Bitcoin grinding down to the mid-teens.
For Switzerland-based Bitcoin exchange Relai, it’s a similar story. The company shared with Cointelegraph that it’s seen plenty of new users as well as increased volume since FTX’s collapse, with November the best month in the Bitcoin exchange’s history.
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Imo Bábics, the chief marketing officer at Relai, told Cointelegraph:
"Well, we are noncustodial, to begin with. We have definitely noticed more people buying Bitcoin due to the FTX crash.”
Relai added, “We know from our friends at ShiftCrypto that there's been a huge increase in demand for their BitBoxes."
ShiftCrypto is a hardware wallet provider like Trezor. The company’s social media feeds shared several stories of users who recently became Bitcoin self-custody advocates following FTX’s bankruptcy.