There is no way to measure the amount of Bitcoin (BTC) that is being sent to self-custody wallets so far, according to an industry executive.
Amid the ongoing FUD over lawsuits against major cryptocurrency exchanges, investors have been increasingly offloading their Bitcoin from cryptocurrency trading platforms.
In mid-June, the Bitcoin offer from exchanges fell to its lowest level since February 2018, according to data from the crypto intelligence platform Santiment. The massive outflows from exchanges have been triggered by self-custody growth fueled by uncertainty around Binance and Coinbase, Santiment said.
The growing trend of self-custody has a huge impact on cryptocurrency markets, Brian Quinlivan, head of marketing at Santiment, told Cointelegraph on June 15.
One of the most notable results of self-custody is that it tends to decrease circulation, thus reducing the market cap tracked by websites like CoinGecko and CoinMarketCap.
“Circulation tends to shrink as coins are withdrawn from exchanges”says Quinlivan, adding that the growing trend towards self-custody has a downside in the form of stagnant currencies.
“This stagnation may have a negative impact on market capitalization due to the lower utility of the network as a whole,” said the executive:
“However, as long as there is a fair amount of FX activity, which there has been, this should generally be enough to cancel out the negative impact of this current phenomenon.”
Quinlivan noted that coins leaving exchanges have a more long-term impact on markets. “Traders sometimes assume that if a massive amount of tokens are suddenly delisted from exchanges for whales, prices will immediately go up,” he said, adding that the firm has seen that it was generally a much more gradual increase.
The Santiment executive noted that Bitcoin supply on the exchange has plummeted from 16.1% on Black Thursday in March 2020 to 9.8% today. “Prices are still up 283% during this time frame,” Quinlivan added.
While the self-custody trend continues to expand, it’s not entirely possible to figure out how much BTC is sitting in cold wallets, according to Quinlivan. According to him:
“Assuming we have all the existing exchange addresses, which no one does, then we could accurately measure how much is moving to cold wallets at any given time simply by subtracting all these known exchange addresses.”
The executive went on to say that for now, blockchain analysts can only give their best guess.
“This is why our exact figure of 9.8% of BTC on exchanges may vary slightly compared to other data out there. However, the more time passes, the more accurate the data we can capture”Quinlivan noted.
The news comes at a time when Bitcoin’s market capitalization continues to shrink, according to data from CoinGecko.
Since mid-April, Bitcoin’s market value has fallen by more than 15%, amounting to $494 billion as of this writing. As Cointelegraph previously reported, BTC’s market cap reached its all-time high of $1.28 trillion in November 2021, when the BTC price reached an all-time high of $68,000.
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