Investors Are Pulling Their Bitcoin Off Exchanges In A Hurry

Investors Are Pulling Their Bitcoin Off Exchanges In A Hurry
Jonathan Hobbs, CFA

over 1 year ago1 min

After FTX’s stunning collapse, it’s not surprising that investors are withdrawing their bitcoins from centralized crypto exchanges – and opting instead to store them in their own private wallets to keep their coins safer.

According to blockchain data provider Glassnode, exchange balances are depleting at a rate of about 106,000 coins per month – the fourth-fastest rate ever recorded.

The chart shows the total number of bitcoins held on major centralized crypto exchanges (orange line), how that’s changed month-to-month (green bars), and bitcoin’s price (gray line). The current outflows compare with only three other times in the past:

The first time was in April 2020, during the Covid crisis, when bitcoin was priced at around $7,000. In hindsight, that turned out to be extremely bullish – investors took their coins off exchanges and opted to HODL (crypto slang for “hold on for dear life”) as bitcoin trended back toward its December 2018 high of $20,000.

The second time was in November 2020, which again turned out to be positive for bitcoin’s price – it ripped from $20,000 to $60,000 in about four months.

The third time was in June and July this year, when bitcoin was priced somewhere between $18,000 and $22,000. And although bitcoin did rally into August to about $25,000, this one did not turn out to be bullish overall.

Bitcoin was trading recently at $16,740, and there’s no way of knowing for sure which way it will move this time around, especially with the market this uncertain. On the one hand, if investors hold their coins off exchanges, they’re less likely to sell them, which could help the OG crypto’s price recover. On the other hand, fewer coins on exchanges mean there’s less liquidity for traders, which could mean more volatile moves ahead.

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