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Tuesday, June 25, 2024

Bitcoin Held on Exchanges Drops to 5-Year Lows: Santiment

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The crypto analytics platform – Santiment – indicated that the amount of bitcoin held on digital asset exchanges has recently plummeted below 6%. The last time the figures were that low was in December 2017.

The decreased trust in centralized platforms intensified shortly after the fallout of FTX (one of the leaders in its field prior to its bankruptcy). Binance has also seen a rise in bitcoin outflows during the past several months, signaling that many users prefer to rely on self-custody over a third-party custodian.

BTC Holders Keep Losing Confidence in Exchanges

As analyzed by Santiment, bitcoin’s supply held on exchanges has fallen to 5.84% – the lowest point in the past five and a half years.

BTC’s Supply on Exchanges, Source: Santiment

The rapid shift from custodians to self-custody methods started at the beginning of 2022 and continued throughout the following months. A steep decline occurred after November last year when the amount of BTC sitting on centralized platforms dropped under 7%.

The FTX meltdown could be considered a major factor. Back then, many investors lost trust in exchanges considering the shocking collapse of the once-prominent entity that was valued at over $32 billion.

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Binance – the world’s largest cryptocurrency exchange – witnessed a massive wave of customer withdrawals in December last year, which (according to CEO Zhao) was triggered by FUD.

CZ assured that his company will remain a solid custodian, suggesting that people should feel protected when storing cryptocurrency holdings there. The rest who have any doubts should feel free to transfer their stash in cold wallets, he added.

Binance’s Recent BTC Outflows

As CryptoPotato reported earlier this week, over 160,000 BTC (worth $4.6 billion at the time) left one of the platform’s wallets in what was described as the largest single withdrawal in its history. Analyst Colin Wu shed more light on the move, arguing it is likely that “the Binance cold wallet was internally adjusted to a new address, and the new address did not transfer out after receiving funds.”

It is worth noting that the company temporarily suspended BTC withdrawals a day earlier due to network congestion. The disturbance lasted a few hours, and operations returned back to normal.

The exchange halted transactions once again on May 8 “due to the large volume of pending transactions.” CZ remained unfazed, using his signature number “4” to indicate that the issue was not serious.

“There are some FUD about BTC withdrawal issues. Here is why. Bitcoin network fees are fluctuating, 18x in a month,” he explained.

The exchange sorted out the difficulties in the following hours and thanked its users for their patience.

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