Bitcoin Investors Embrace Self-Custody Following FTX Collapse

The Post-FTX Landscape for Bitcoin Investors

In the wake of the catastrophic collapse of the FTX exchange, a seismic shift is underway among Bitcoin (BTC) investors. A notable surge in withdrawals to self-custody solutions has been recorded, as many seek to regain control over their assets. It appears that trust in centralized exchanges is at a historic low, prompting a movement towards self-custody to ensure safety.

Historic Demand for Self-Custody Wallets

According to analytics firm Glassnode, the recent on-chain exchange flow data has illuminated a staggering trend: Bitcoin exchange outflows are nearing historic highs, with around 106,000 BTC being withdrawn each month. This marks a significant uptick, comparable to only three past occurrences:

April 2020
November 2020
June/July 2022

Furthermore, the number of Bitcoin wallets receiving funds from exchanges surged to nearly 90,000 on November 9, showcasing an urgent call for self-reliance in asset management.

Confidence vs. Caution: The Investor Dilemma

While exchange outflows are generally seen as a bullish indicator—suggesting that investors are holding their Bitcoin long-term—this current trend reflects a stark reality: a deepening mistrust in centralized crypto platforms. Glassnode pointed out that outflows have led to positive balance changes across various wallet sizes, demonstrating a collective shift in investment strategy:

Wallets with less than one BTC (referred to as “shrimps”) increased by 33,700 BTC.
Those with more than 1,000 BTC (the “whales”) saw a rise of 3,600 BTC.

This data indicates that the self-custody movement is not limited to small-scale investors but extends across the board, with larger holders also opting for autonomy.

Leading Voices Advocate for Self-Custody

With the phrase “not your keys, not your coins” resonating louder than ever, industry leaders are advocating for protecting one’s assets through self-custody. Ethereum educator Anthony Sassano emphasized that crypto holders should refrain from storing their assets on centralized exchanges unless actively trading large amounts. Moreover, MicroStrategy’s Michael Saylor highlighted that self-custody eliminates the risk of centralized third parties exploiting their authority.

Stablecoins Experience a Surge as the Market Shifts

Interestingly, alongside the Bitcoin withdrawals, Glassnode reported that stablecoins—many of which faced instability last week—are now flowing onto exchanges at unprecedented rates. On November 10, over $1 billion in stablecoins flooded centralized exchanges. The total stablecoin reserves across all tracked exchanges reached a record $41.2 billion.

As the dust settles from the FTX fallout, it is clear that these events will likely reshape the crypto industry, prompting a greater preference for trustless assets over those controlled by centralized entities.