Rise of Self-Custody Prompted by Doubts Around Binance and Coinbase
Amid the ongoing fear, uncertainty, and doubt surrounding legal action taken against major cryptocurrency exchanges, investors have been increasingly transferring their Bitcoin away from crypto trading platforms.
By mid-June, the exchange supply of Bitcoin had dropped to its lowest point since February 2018, according to Santiment, a crypto intelligence platform. The massive exchange withdrawals were caused by the rise of self-custody, which was prompted by the doubts surrounding Binance and Coinbase, according to Santiment.
Brian Quinlivan, head of marketing at Santiment, informed Cointelegraph on June 15 that the growing trend of self-custody has a major influence on cryptocurrency markets.
Self-custody generally leads to a decrease in circulation, which in turn lowers the market capitalization recorded by websites such as CoinGecko and CoinMarketCap.
Quinlivan remarked that when coins are taken off of exchanges, circulation tends to diminish, and the increasing trend of self-custody has a negative effect in the form of stagnant coins.
The executive commented that this stagnation can lead to a decrease in market cap due to the decreased usefulness of the network, further adding that.
Impossible to Calculate Quantity of Bitcoin Sent to Self-Custody Wallets
Quinlivan remarked that the removal of coins from exchanges has a greater long-term effect on markets. “Traders may think that if a substantial amount of tokens is rapidly taken away from exchanges by whales, prices will instantly increase,” he remarked, noting that the company has observed that it is usually a more gradual increase.
The executive from Santiment mentioned that the amount of Bitcoin held on exchanges has dropped from 16.1%, which was the case on Black Thursday in March 2020, to 9.8% now. Additionally, he stated that “prices have risen 283% in this time period”.
It is not feasible to determine the amount of Bitcoin held in cold wallets, as the self-custody trend continues to grow, according to Quinlivan, who stated:
The executive continued by stating that at present, blockchain analysts can only offer their most informed guess.
Quinlivan pointed out that the percentage of BTC held on exchanges we report, 9.8%, may differ slightly from what is reported elsewhere. He added that as time passes, the data we are able to obtain becomes increasingly precise.
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The announcement coincides with Bitcoin’s market capitalization remaining on a downward trajectory, as evidenced by data from CoinGecko.
Since mid-April, Bitcoin’s market capitalization has decreased by over 15%, currently standing at $494 billion. As previously reported by Cointelegraph, the BTC market cap reached its peak of $1.28 trillion in November of 2021, when the price of BTC hit an all-time high of $68,000.
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