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according to Glassnode on-chain data analyzed by Cryptoslate, leaving less than 22% of all mined BTC moving around and exchanging hands.

These indicators show that investors are starting to withdraw their digital assets away from the exchanges, whether using wallets or other methods.
Indices measure the movement of currencies as a function of whether the transaction is in cold storage or in a hot wallet.






Source: https://cryptoslate.com/research-2nd-december-the-15m-bitcoin-just-went-into-self-custody/


Is everyone beginning to understand Not your Keys, Not your coins , or is it temporary because of FTX?

Not surprising knowing that people got a bit too spooked by the FTX fiasco, and the fact that there are rumours about a lot of exchanges being potentially insolvent. I assume hardware wallet companies(Trezor/Ledger) have had a great time since the last few months.

Also, while this is great news, let's not forget that people can still just easily send back coins to exchanges once things settle down.

They even noticed it before the FTX crash, but they believed in the exchange so much they didn't mind it. However, as far as FTX is concerned, there are many negative issues that may make them uncomfortable keeping their assets on the exchange so they choose to withdraw their assets to their respective wallets.

But as @mk4 says, these assets will be very easy to transfer back to the exchange when their holders start to trust the exchange again as before. For a while, the situation of centralized exchanges really lost a lot of holders as most of them withdrew their assets, but it will return to normal with time.

I believe the rumor part is the only reason why people are panic withdrawing their coins from centralized exchanges otherwise events similar to FTX have happened in the past and the users reaction weren't like this. But the fact that media and some "celebrities" got behind the story that others are also insolvent got them moving.

I think that crypto users have already become smarter and do not store their assets on centralized exchanges or the minimum amount for trading. As a result of the recent bankruptcies of large crypto companies, many institutional investors and not individuals have suffered.

I personally think it's all temporary because of the recent FTX collapse. Since the collapse the voices about not your keys, not your coins are echoed everywhere.
The idea of using hardware wallets and non-custodial wallets are circulated almost everywhere which is why there's a sudden increase of withdrawals from exchanges.
People are afraid that the collapse of FTX can trigger other exchanges to collapse as well which is why there's a panic in the community to withdraw their coins from exchanges to their wallets.
Once the dust settles and bitcoin and altcoins spike up I am quite sure that people will send their coins back to exchanges to trade and take profits.

On-chain analysis leaves big room for mistakes. Don't take anything glassnode posts for granted, because there might be conflict of interest, and no way of proving their statements otherwise.

That doesn't mean 22% of the circulation is at custodial exchanges, though. It just means that the 78% is held untouched (not necessarily cold storage either). A fraction of that 22% is likely to be stored at exchanges.

Rumor, level of total capital evaporated in FTX collapse and the very short time of the exchange collapse make people superb panic.

I could be wrong because I did not experience past collapses (I only join cryptocurrency market in 2017) but for me, this collapse makes some records for fastest collapse within 2 days and total capital lost on FTX itself as well as impacts on some related cryptocurrency companies in FTX network.

People don't change and they will send their coins to exchanges again when panic gone.

Yes, I do agree that people got scared cause of the recent FTX drama and the rumors and downright misinformation floating around. And yes, hardware wallets companies have had good business for the past few months.
I also think that sadly, people would go back to being comfortable to putting their funds on exchanges when all of this nonsense dies down. Hopefully, people would more sensible that exchanges are no good for holding and storing your funds

It looks like this happened right after we heard about the FTX crash, so there was no need to wait until today to find out about it. But the next question is whether we and the investors will leave centralized exchanges forever or temporarily stop using them for the time being. We all know using CEX is risky but we won't need it anymore. I really doubt it, I predict that we will soon forget what FTX did, and we will soon rush to the exchanges when the bull season comes. Just one season of bulls can heal all wounds, investors will quickly forget the pain once they make a profit.

OPs description of liquid vs illiquid is in correct

a measure of addresses that are 'use once' vs 're-use' is not a factor of showing whats an exchange and whats a users self custody. nor is it a sign of liquidity

there are many users that do "re-use" and
many exchange do "use once" cold wallet

EG say an exchange has a 10k btc haul
when its time to break the haul to supply a hot wallet with 1k coin. they put the 'change' into a new address

an easier estimate.
is usually the "bitcoin richlist"
the top 3 categories
[100,000 - 1,000,000)   793,314 BTC
[10,000 - 100,000)   2,262,241 BTC   
[1,000 - 10,000)   4,630,567 BTC   


are usually the hauls of large establishments/services. not individuals
lets compare that to the start of the year

[100,000 - 1,000,000)   672354
[10,000 - 100,000)   2072651
[1,000 - 10,000)   5177623

which is a total of
Jan:  7922628
now: 7686122
which is a 3% decline of coins in large hauled addresses

its only an estimate. but based on the brackets from the start of the year to the end of the year.

there is less coins in cold wallets(top 2 categories) and more coins in hot wallets/those with access to upto 10k coins per address

It is a great development.  It's only half the battle though.  While this will protect the purchasers of BTC who move it off chain, it doesn't stop the exchanges from selling fake paper Bitcoin to their customers.  FTX for example, was taking people's money and telling them that they owned BTC, then spending that money on shitcoins to inflate to the moon in order to take loans against them.  Sam has even stupidly said that this sort of action is why the BTC price was so high.  I think he's an idiot and completely wrong.  Had exchanges not been selling fake Bitcoin and steering people's money into shitcoins, Bitcoin likely would have seen a much higher peak in price that was more in line with the 4 year top cycle.

This is the silver lining of all the unpleasant things that are happening in the crypto industry right now. This must be good. But this is probably not exactly the same as people realizing the value of not your keys, not your coins. Much of this is probably panic withdrawals. When centralized exchanges and platforms are falling, including one that was too big to fail, people are afraid to keep their coins there. But where are they moving? How many are actually moving funds from a CEx or a lending platform to another custodial wallet? How many are moving funds from, say, Coinbase to another online wallet? How many ceased to stake their funds only to be moved to a closed-source wallet?

it's time for investor withdraw the money whatever news FTX or something, because when we look a year after halving, it is begin bearish and after investor bought at all, this is the time for them to keep hold it again on custody wallet until 2024. or maybe something bigger than FTX will happen next.

and before the halving, it will be the peak that everyone is waiting for because the bull market will come soon before the halving.
But holding in a custodial wallet until 2024 may not be a matter of time but keeping in a custodial wallet will be the safest way than entrusting in a centralized exchange.

Currently, centralized exchanges are starting to be shunned by investors and as explained by the OP Investors have begun withdrawing their assets from centralized Exchanges after the FTC collapsed and harmed many people.

The event of the collapse of FTX with very many losses will be a dark history for crypto, but when compared to Mt.Gox and referring to the years in its heyday, the event of the collapse of Mt.Gox is still more significant because almost 50% of the crypto market was controlled by Mt.Gox at the time that.

I am sure many people in crypto are now learning the many big risks associated with trusting centralized platforms especially if you are into one that is not pro-active in terms of transparency and management matters - well just like the incredible Sam Bankman Fried who pretended as someone we can trust and who has not yet admitted that he committed big frauds with the exchange he founded. This can be bias on my part but trusting people in crypto who are still young can be more risky - this is just my opinion. We have to make sure that we have the custody of our crypto funds and remember always that if we don't have the keys then we never have the control over anything.

This is normal after the recent unfortunate incidents in the crypto market, especially the bankruptcy of FTX and then the bankruptcy of BlockFi. People started to worry about their money, so everyone started transferring bitcoins to their safe wallets, but I expect that when the market rebounds again, speculators will start returning to the exchanges because they need to Do the trading and get some profit. But I hope they learn powerful lessons from these.
As for Holders, in fact, they were not affected by all these incidents, and they will leave their money safe in their wallets as it was until they see a new peak for Bitcoin.

Yeah, unfortunately that is true. Most people don't want to learn and while centralized exchanges are losing "volume" in short term, after a little while (maybe 2 or 3 months from now) everything will go back to "normal" and they all re-deposit their coins on the same exchange forgetting what happened today!

Back to normal but not how it was before the collapse occurred. The volume increases simply because those who don't want to learn from their mistakes start to go back in and forget what happened, which makes a lot of losses.

But will you follow a system like LUNA, even though they are back with a snapshot update by changing LUNA classic to LUNA (new) but the price will still not return to normal?

Normal conditions only apply to coins that are not heavily impacted by the FTX crash event.
In my opinion, the same exchange as FTX will no longer be in demand and will be blacklisted even though it is still operating.

I do not think so. Based on this chat, it seems that the price is what controls the morale of individuals more than technical problems or hackers, which is logical. When the price increases, more people rush to sell.


It does not seem that we will witness high fluctuations in the price, so it is safe to say that the current rates will remain without much change for the next year, but after two years or more, most of us will forget what happened and the same patterns will be repeated.

I think it's mostly the FTX tragedy, not something like people have learned about NYKNYC. However, a little percentage of people have learned what is a custodial wallet and we should avoid them. In one of my Facebook groups regarding bitcoin, people started to look for non-custodial wallets but before the FTX issue, they never bother to learn even despite my continuing awareness article on such issues. However, this is not the first time. There was mtgox exchange that had almost the same issue. Who has learned? Not more people than who have been the victim.

I hope the FTX story will have a long-term impact, as people are currently withdrawing their funds from centralized platforms and will get used to storing them in non-custodial wallets, so in the future there won't be any need to move back to centralized platforms. Hopefully, people becoming more mindful of the storage and less trusting when it comes to exchanges will also force exchanges to review their policies and suggest better conditions to their users (for example, a guarantee that the exchange does not use the money of customers for any purposes and earns profits in other ways).

Finally something of good news after long time. If Satoshi is out there then he might be happy about it considering peeps are actually going back to normal methodology of using bitcoin. All custodial wallets and p2p preference of transacting. This is what was needed during this period and also as we know that recession is at our doorstep it’s better that bitcoin goes all dormant and trades stop for a while. This is just to relax the community who love to see bitcoin in dollar value all the time. Thanks to FTX lesson. It did good.

Yeah, probably an offshoot on what had happened to FTX and that is why many investors are withdrawing right now and doing self custody. But we don't know how long this will take though, maybe again because of this event and once it is forgotten in the next couple of months, everyone is going back to it's norm. Depositing huge amount of bitcoin in exchange for whatever purposes they have, trading, etc.

So this is not yet final in my opinion, we need to go back and see the data maybe in the beginning of the 2nd quarter next year to see if everything has settled down a bit.

What's amazing is, in the past people just sold to USD and left the market. Now they're holding their btc instead - too precious to them to dump. Underrated paradigm shift imo.

Definitely agree with you on this, people tend to forget too early what happened in the past and also greediness plays an important role in this kind of decisions : some really tempitng offers by some reputalbe exchanges ( applies to protocols as well) like two digits interests on stablecoins and a general acceptance of them as if they were normal and sustainable in the long run will do the trick again.

Call me pessimistic, but I think it's just realistic to say: It's temporary. Sure, with the "funny" fuck-ups that immediately became public knowledge within FTX's company structure as well as the extreme scale of this whole thing, it gained an unseen-before media attention. When it's October 2023 and we are starting another bull-run, there may be some warnings from seasoned Bitcoin-veterans, but all-in-all especially any newcomers will again just leave their corns on exchanges until they either get burned themselves, or are lucky / smart enough to get educated.
There were so many similar (even though smaller in regards of monetary damage) incidents with exchanges almost every year before FTX... So what really is different with this one?



That IS an interesting thought. And I think you are partly right, regarding quite a few ppl that were just semi-hodling and amateur-trading with their coins on exchanges. In the long run I am pretty sure it still needs a few more Mt. Goxes and FTXes and probably another decade for a general "not your keys - not your coins awareness".
Maybe this will not happen until some sort of basic Bitcoin education is part of the school system.

It's clear that the decrease in the number of Bitcoin moving around / exchanging hands is due to a growing awareness among investors of the importance of securely storing their Bitcoin. As more people became aware of the risks associated with keeping their Bitcoin on exchanges, shitchain bridges or even in hot wallets, they are taking steps to move their funds into more secure forms of storage. This is a positive development that implies people becoming more savvy about managing their own Bitcoin and taking steps to protect It.

It's also important to remember that even though centralized exchanges play a legitimate role in the Bitcoin ecosystem, Bitcoin was never intended to be custodied by a third party. The decentralized nature of Bitcoin means that individuals are ultimately responsible for the safekeeping of their own funds, and it's crucial for people to take steps to protect their networth and retain control over their own Bitcoin.

Excellent infographics and I think these really actually depict what you are saying. This seriously means that people are taking things seriously and they are doing what actually they should have done from very start. Moreover obviously with the world's second biggest exchange going bankrupt like this it's obvious your trust on such systems goes very down. But yes you are eight it can be temporary as well because people really forget these things in long term when they see ease.

Update:
Around 200k Bitcoin flowing out of exchanges last 30-days worth $3.4 billion.


Source: https://www.reddit.com/r/Bitcoin/comments/ze7f90/around_200k_bitcoin_flowing_out_of_exchanges_last/

---

It seems that some began to learn the lesson and withdrew their currencies, as about 200k bitcoins is not considered a small amount, but for how long this memory will remain strong and they will not try to be lazy and leave their currencies in centralized platforms.

As we can see from the charts, the amount of bitcoins out of exchnages these 30 days is the largest even since 2016.
I expect people to forget all these details with the next cycle after about three years

update

using the "bitcoin richlist"
the top 3 categories
january 2022
[100,000 - 1,000,000)   793,314 BTC
[10,000 - 100,000)   2,262,241 BTC   
[1,000 - 10,000)   4,630,567 BTC   

december 2nd
[100,000 - 1,000,000)   672,354 BTC
[10,000 - 100,000)   2,072,651 BTC
[1,000 - 10,000)   5,177,623 BTC

december 18th
[100,000 - 1,000,000]   684,123 BTC
[10,000 - 100,000)   2,291,459 BTC
[1,000 - 10,000)   4,601,707 BTC


which is a total of
Jan:  7922628
dec 2nd: 7686122  (average 770 a day removed(jan-dec day avg))
today: 7577289 (average 6800 a day removed(dec day avg))

seems people are still pulling coins out of exchanges, and it seems to be more coins on average per day in december than the amount per day average for the year

If indeed the FTX case has taught us about security, then will the percentage of trust in other exchanges have any effect. To this day how many exchanges are listed and how do they provide answers regarding the level of security, while the owner of Binance once said, that the exchange is not a place for long term asset storage (if my memory serves me correctly).

Exchange reputation has different levels of trust. When the FTX case starts to no longer be discussed in the public sphere and it no longer makes people feel afraid, it will return to normal conditions. On the other hand, many people are starting to realize that the exchange is not a safe place to store assets, both for the long term and in large quantities.

Which is likely the case. Exchanges are a hot topic, and several news sources as well as users on the forum are talking about a domino effect, potentially happening. Probably has a lot of users spooked, and therefore they've temporarily decided to take it off of exchanges.

It'll be interesting to see what happens again after a year. A lot of these people are traders, so they'll insist on having their coins on an exchange for the fastest possible way of trading, and therefore capitialising on the market. Even though, I personally disagree with that approach.

This is to be expected. The not your keys not your movement statement that proceeded FTX's collapse made grounds on the crypto space and had shed light on how little your control is when you entrust your coins to a centralized exchange no matter how trustworthy they are. I suppose another bullrun may implore these investors to use their money and bring it to their hotwallets again but that'll take time, seeing as things go we are still in recession, and it may take a while for the outside economy to recover, and incidentally crypto market itself.

I've always wondered, how do these on-chain data analysts know that coins are going into self-custodial wallets? Do they consider everything that is not related to exchanges or some other known services to be self-custodial? That doesn't necessarily have to be the case.

I think they have parameters set that will at least let them predict it's a self-custodial wallet. For instance there should be indicators on the address AFAIK, and the number of incoming and outgoing transactions could also be a giveaway to what type of wallet that is. I find that I have a lot of incoming transactions in my cold wallet, they could've applied the same logic here. Finally, its relevance to the current events. As said earlier this massive move happened after the collapse of FTX, so an educated guess could be made that would lead someone to think this is an upsurge of users transferring their money to cold wallets.

This is not a very great news, neither is it a news that should bother us for so long because the movement of funds in cryptocurrency has started for so long and will continue to happen in as much as the cyclical nature of Bitcoin continues to happen.
Let's keep the exchanges problem outside for now, when bitcoin goes down again to the bearest bottom and start to move towards Bull state you will understand that many people will need to move their money back to exchanges in order to buy Bitcoin.

So it does not make any difference for the movement because they will still go back to exchange. Even in this process many people will lose their funds. It will be fine that we stop creating this FUD we are creating.

According to this report 15 million BTCs are now held in self-custody which leaves less than 22% of all mined BTC on exchanges.

It's been a month since I wrote this thread and it seems that more and more investors still prefer to keep their currencies off the platforms.

We hope it will be a continuous trend.

That doesn't seem very credible to me, because if 15 million BTC is in self-custody, all those analyzes that said that about 4 million BTC were lost, then it turns out that CEX doesn't really have anything or just dust? I know that this whole story about where are all the mined BTC and how much has been lost is mostly made up of speculation based on a not very logical methodology, but something in that story is not right and someone is obviously manipulating the data.

On the contrary, the word "self-custody" refers to the possibility of accessing the private key of one individual, whether he has access to that private key or not, and therefore in this term he enters:

• Coins that have been withdrawn from CEXs.
• Coins that have been mined and not sold.
• Coins in cold storage (even CEX cold storage)
• Lost coins.

So the number is logical or is it a measure of whether the money is in the hot storage or not.

you can read this with

Still people are using the exchangers like never before. I don't know but these incidences from the last year should have ignited marching of Not your keys Not your Bitcoin long ago but it only seems that forum people are aware about it and not the whole crypto community. You say - you say, there are always brokers, institutional investors who are going to deny the fact and will attract their customers to invest and as soon as they invest they will get the custodu of their coins and you will loose the ownership right there.

A person lost more than 4 billion against the lawsuit filed over exchangers custody. ToS simply stated if they are in the possession of exchanger then they are gone.

there were 7.92m in large hold addresses (services, custodians) last january
out of 19.26m circulation means that 11.34mill were more likely a number in "self custody"

there are 7.54m in large hold addresses (services, custodians) this month
out of 19.26m circulation means that 11.72mill were more likely a number in "self custody"

this is the general psychology of investors. A series of scandals came to the market and made them afraid and pressure to take profits caused the market to crash. That will pass quickly if we continue to hold our coins obliviously

I think it has something to do with the US government, showing signs that it wants to over regulate Crypto currencies. The government can only concentrate their regulations on centralized services like wallet providers and Exchanges, so they are the main targets.

So, by moving your coins out of these centralized services, you effectively "free" up your tokens from these strict regulations. We just hope that the US elections will sort out these dark clouds that are hanging on the horizon.  ::)

As governments, they do want to regulate things if they can do. They will try to do their best from regulation to gain more tax from their citizens. Their very first targets would be centralized exchanges, merchants, marketplaces and centralized cryptocurrency like altcoins. With cryptocurrency wallets, they will target custodial wallets first and even they aim at non custodial wallets, no way for them to control keys of those wallet users. It's their key, it's their coin.

Bitcoin is a coin, not a token.

No idea why have you decided to bump this 6 months old thread, but the topic discusses people choosing to withdraw from exchanges into non-custodial wallets. This is not the behaviour of someone looking to panic sell, but quite the opposite.

I wonder if the trend continued since this topic was created. I have no access to that chart on glassnode (not available to standard users) but if anyone could post an update, it would be great. I sense the outflow from exchanges was likely to continue, i.e. considering some regulatory limitations imposed on exchanges, e.g. binance closing their "earn" options in some of the countries, making it pointless for many to keep their funds there.

According to the data collected by coinglass.com and shown in the graph below Bitcoin outflow from exchanges has taken a pause in last six months but if we zoom out we can definitely state it is a general trend switching from exchanges to self custodial solutions.

https://static.news.bitcoin.com/wp-content/uploads/2023/05/bitcoin-exchange-reserve-all-exchanges-2048x1290.png