Bitcoin investors are moving the bulk of their holdings into self-custody, according to data from Bitwise Asset Management.
Cryptocurrencies have been in a bear market for nearly three years now and bitcoin BTCUSD, -0.33% is down more than 70% from its December 2017 peak of $20,000. Despite this, the number of on-chain addresses has grown by about 1 million since then and transaction volume has increased significantly as well — showing that there’s still plenty of interest in cryptocurrencies despite their depressed prices compared with last year’s highs.
Institutional investment platforms such as Grayscale Bitcoin Trust and MicroStrategy’s MSTR, -0.84% MSTR, -0.90% $250 million bitcoin purchase for their corporate treasury have collectively moved more than 700,000 BTC — about 3% of the circulating supply — off exchanges since May.
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This move is indicative of an industry-wide trend toward self-custody in response to various factors including heightened regulatory scrutiny and improved technology infrastructure that enables investors to secure their own keys.
Self-custody is more popular with institutional investors and those who hold large amounts of Bitcoin.
`They are moving their funds from exchanges to self-custody because they believe that the latter is safer than leaving funds on exchanges,’ said Max Boonen, CEO of blockchain analytics company Tradewinds.
In a recent interview with Cointelegraph, Boonen also stressed that government regulation has been pushing institutional investors away from centralized cryptocurrency platforms. `It’s becoming clear that regulators aren’t going to let these things fly forever… Cryptocurrencies are being created by private companies and banks so it’s not surprising people want them regulated like any other financial product out there today,’ he explained.
This is good news for cryptocurrency investors, who can now be confident that their funds are safe from theft or loss. However, it also means that some exchanges will be forced to shut down as they lose customers and revenue.