On-Chain Data Shows Investors Waiting, Changing Custody Behavior

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Blockchain technology is ever-evolving, and so is the often subjective art of blockchain analysis.

Nowhere is that truer than now, in the wake of the collapse of Sam Bankman-Fried’s FTX exchange – as the crypto industry faces a radical reckoning with concepts like risk and trust.

Recent on-chain data shows a change in custodial attitude by investors, while implying a continued interest in acquiring and holding digital assets.

As the fallout from the FTX collapse widens, trust in centralized exchanges has reached an all-time low. It’s not irrational, given recent events.

Bitcoin and Ether Supply

Glassnode data shows that bitcoin withdrawals from exchanges have sharply increased, with BTC balances on these platforms falling by 72.9K BTC ($1.2B) in just seven days.

The metric looks to capture the movement of coins from exchanges and on to self-custody wallets. It’s a measure of movement, not liquidation. Investors are essentially saying, “I trust the asset, but no longer trust you.”

The same is evident for ether (ETH), as investors withdrew 1.01 million ETH from exchanges over the past seven days.

The FTX collapse marks a new starting point in how investors use exchange balances of BTC and ETH. Often, increases in the exchange balances for BTC and ETH implies bearish sentiment, as coins are sent to exchanges to ready them for sale.

But a comparison of current levels to levels prior to November 2022 may give investors a distorted view.

Now, the outflows might be signaling something very different: that users don’t want their coins sitting on the exchange – as a precaution against the risk of another deposit run similar to what just happened at FTX.


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