Arcane: VTC holders withdraw funds from exchanges and cryptocurrency services
According to Arcane Research, cryptocurrency owners are withdrawing funds en masse from exchanges and cryptocurrency lending services, preferring to store them in cold wallets.
The events of the first half of 2022 in the cryptocurrency market have forced many crypto holders to rethink their risk management practices. The collapse of decentralised finance (DeFi) protocols and the bankruptcy of cryptocurrency lending platforms reinforced the “who owns the keys, owns your cryptocurrency” thesis.
Hodlers have been moving their precious #bitcoin out of exchanges like never before following this summer’s collapse of major crypto lenders.
These events undoubtedly damaged the lenders’ trustworthiness, but are hodlers also losing trust in exchanges?
This trend is particularly illustrated by the behaviour of bitcoin holders. As a result of blockchain or loss of funds, Bitcoin holders have begun withdrawing their assets from exchanges at an astonishing rate. Analysts note that after years of growing confidence in crypto exchanges and credit platforms, counterparty risk has suddenly become the most important factor.
This was facilitated by “a cascade of negative events that continued through July, when some of the largest cryptocurrency market participants collapsed.” Hedge fund Three Arrows Capital, cryptocurrency lender Celsius and broker Voyager Digital, for example, are now at some stage of bankruptcy. The collapse of these companies has led to the blocking of client funds and a total loss of assets is likely to be the consequence.
“In June, the net outflow from the exchanges was 119,000 VTS, the highest since November 2020. In July, 96,000 VTS were withdrawn from the exchanges. Exchange outflows continued in August, with 65,000 VTS withdrawn in the first 22 days of the month,” the report said.
The total number of bitcoins held on exchanges is now at its lowest level since July 2018. Investors are going off the deep end and are very reluctant to invest in cryptocurrency investment products. A Coinshares report in the past week shows more than $8 million in outflows from digital asset investment products.
Arcane Research concluded that, overall, crypto-asset holders continue to hold a positive view of the industry’s future. However, they are no longer willing to entrust their cryptocurrency to third-party services and have returned to the original idea of being independent custodians of their own funds.
Earlier, Arcane Research, having studied the 2022 mining market, concluded that the crisis almost brought it to collapse and it will take a significant period of time for the sector to recover.
