FTX Implosion Reminds Investors ‘Not Your Keys, Not Your Coins’
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FTX Implosion Reminds Investors ‘Not Your Keys, Not Your Coins’

Created 4mo ago, last updated 4mo ago

On-chain intelligence firm Glassnode reported a record flow of Bitcoins from centralized exchange wallets to self-custody following the bankruptcy of crypto exchange FTX.

FTX Implosion Reminds Investors ‘Not Your Keys, Not Your Coins’

A record number of crypto holders are moving their funds off centralized exchange wallets in the wake of the collapse into bankruptcy of FTX and FTX US.

On-chain market intelligence firm Glassnode said Sunday that 106,000 Bitcoins have been off-ramped from centralized exchanges into self-custody “[f]ollowing the collapse of FTX.”

That’s a number, it said, only matched three times, in April 2020, November 2020 and June-July 2022.

However, how much panic there is currently beyond normal this year is debatable. While Crypto Fear & Greed Index halved from 40 on Nov. 6 to 21 on Nov. 12, it was in the low 20s throughout September and October, and stayed roughly in the six to 12 range in May, June and July, when the price of Bitcoin dropped from around $40,000 to below $20,000 in the space of six weeks.

Beyond that, Glassnode said the move to self-custody cryptocurrencies “has been dramatic across all cohorts since 6-November.” Its numbers showed that centralized exchange outflows by token holders with balances lower than 1,000 BTC were far higher than those of whales with larger balances.

“Shrimps” with less than one BTC removed nearly 10x more than the 3,600 Bitcoin “whales” did, while “sharks” with Bitcoin balances of 10 to 1,000 BTC took well over 20x. Crabs, with one to 10 BTC, moved 13.5x as many Bitcoins onto cold wallets.

Not Your Keys, Not Your Coins

In many ways, those moving their crypto holdings onto cold wallets from exchanges are just following very basic advice given by most crypto experts — including more than a few centralized exchange CEOs.

Binance’s Chanpeng “CZ” Zhao and MicroStrategy executive chairman Michael Saylor have been the highest-profile recent voices warning that self-custody is far safer than keeping funds of exchange wallets.

Zhao called self-custody on privately owned cold wallets “a fundamental human right” on Nov. 13, linking to a two-year-old post he write on the subject, while Bitcoin maximalist Saylor said at a conference a few days earlier that “[i]n systems where there is no self-custody, the custodians accumulate too much power and then they can abuse that power.”
Saylor added that self-custody via cold wallets is an important provider of “checks and balances,” Cointelegraph reported.
But “not your keys, not your crypto” is a piece of advice that has been given for years, notably by Bitcoin advocate and author Andreas Antonopoulos.
Tesla CEO and Twitter owner Elon Musk warned that “[a]ny crypto wallet that won’t give you your private keys should be avoided at all costs,” back in 2021.
And both Coinbase CEO Brian Armstrong and Kraken founder (and then-CEO) Jesse Powell advised people to self-custody their crypto after Canada invoked its Emergency Act during February’s trucker protests. Powell said:
“Please do not fund causes directly from custodial wallets. I'm sure freeze orders are coming. Withdraw to non-custodial before sending.”
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