Cryptoverse: Bitcoin investors take control

Jan 24 (Reuters) – Paranoid? The domino fall of FTX and other crypto custodians is enough to make even the most credulous investors grab Bitcoin and shove it under the mattress.

Indeed, holders large and small are moving their funds from crypto exchanges and trading platforms to private digital wallets.

In a sign of this shift among retail investors, the number of bitcoins held in small wallets — those with fewer than 10 bitcoins — rose to 3.35 million as of January 11, a 23% increase from 2.72 million a year ago. From CoinMetrics.

As a percentage of the total bitcoin supply, wallet addresses holding less than 10 bitcoins now own 17.4%, up from 14.4% a year ago.

“A lot of this depends on how frequent the trade is,” said Joshua Peck, founder of hedge fund Trucode Capital. “If you’re going to buy and hold for the next 10 years, it might be worth investing and learning how to manage your assets.

The stamp has been led by large investors due to the FTX scandal and other crypto falls.

The 7-day average of transactions from centralized exchanges to private wallets rose to a six-month high of $1.3 billion during the FTX crash in mid-November, according to Chainalysis data.

Large investors with transfers of more than $100,000 were responsible for 68 percent of the flows, the data showed.

Reuters graphics

where are my keys

Not your keys, not your coins.

A mantra among early crypto enthusiasts, warning that access to your money is paramount, as financial platforms have dwindled like flies in the past year.

But self-preservation is no walk in the park.

Wallets can be “hot” or “cold” in offline hardware devices connected to the Internet, although the latter is typically less appealing to first-time investors, who often buy crypto on major exchanges.

Multi-level security can often be a difficult and expensive process for the small-time investor, and there’s always the challenge of keeping your encryption key—a string of data similar to a password—unlost or forgotten.

Meanwhile, hardware wallets can fail or get stolen.

“It’s very challenging, because you have to track your keys, you have to back those keys,” Peck told True Code Capital, “I’ll tell you that’s the most challenging prospect of managing a multi-million dollar crypto portfolio.”

Since many traditional financial institutions cannot legally “self-hold” investors’ assets, institutional investors have turned to regulatory custodians – special companies that hold them in cold storage.

One such firm, Bitgo, which provides custodial services to institutional investors and traders, said in December that board inquiries had seen a 25 percent increase in people looking to move money out of exchanges and a 20 percent jump in assets. in prison.

David Wells, CEO of Enclave Markets, said trading platforms are extremely cautious about the risks of storing investors’ assets with a third party.

“The comment that stuck with me was, “Investors will forgive us for losing some of their money with our trading strategies, because that’s what they sign up for. They don’t forgive us for being a poor watchdog.”

(This story has been edited to show that large investors are responsible for 68% of the flow, in paragraph 8.)

Reporting by Meda Singh and Lisa Pauline Matakkal in Bengaluru; Editing by Pravin Char

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The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and impartiality under the principles of integrity.


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