The financial turmoil occasioned by the FTX liquidity crisis has led to investors withdrawing their Bitcoin from Centralized Exchange (CEX) wallets en masse as attention now turns to their dependability.
Today, JA_Maartun, a community manager at onchain analytics firm CryptoQuant shared a post showing mass withdrawals from exchanges in the spirit of the decade-old adage “not your keys, not your coins”.
“More than 80.000 BTC left exchanges wallets in the last 24 hours. Investors are withdrawing their Bitcoin to store them in places other than an exchange,” Maartun wrote.
According to the pundit, those withdrawals showed that “people are losing confidence in those companies”, given the mess that the crypto community has seen in the past few days. “How are you holding your coins? Are they stored on an exchange, in a hardware wallet or another option? It might be the right time to re-evaluate it,” he added.
Following the revelation of FTX’s financial crunch last weekend, the crypto community has been reacting, selling their holdings for fear of a deeper plunge in crypto prices. On Wednesday, the crypto market witnessed the biggest longs liquidation event since the Luna crash.
Data from Santiment also showed that Bitcoin whales holding 1,000 to 10,000 BTC sold around 140,000 BTC in the past two weeks, worth roughly $2.25 billion. According to independent crypto analyst “Ali,” the FTX situation has spooked miners, forcing them to liquidate their BTC holdings to reduce the stress that falling prices have occasioned.
“Bitcoin miners appear to be taking FTX news with caution. On-chain data shows that BTC miner reserves dropped by roughly 3,000 $BTC in the last two days, worth around $48 million,” Ali tweeted.
Until recently, much of what caused FTX’s financial problems had largely remained obscure. On Wednesday, a report that the SEC, the CFTC and other regulators had been probing the crypto exchange in the past few weeks rattled investors. Furthermore, reports that the website FTX Ventures and Alameda Research, the quantitative trading firm founded by FTX CEO Sam Bankman-Fried, had gone dark since Tuesday in the wake of FTX’s liquidity crisis only served to worsen the trust score of crypto exchanges.
“The collapse of FTX reaffirms the need to move beyond opaque trust-based systems more than ever,” tweeted Ryan Watkins, founder of crypto-focused hedge fund Pangea Fund Management. According to him, it was time for DeFi to take the lead to prevent entities from hiding insolvencies and misappropriating depositors’ funds.