Bitcoin adopters seem eager to hold their own coins as withdrawals now outpace deposits on exchanges. This cryptocurrency outflow reflects the growing unease about the state of the global economy, as well as the stability of the crypto space.
BITCOIN EXCHANGE BALANCES HAVE BEEN DECLINING FOR WEEKS
Analytics firm Glassnode has noted that exchange liquidity has been declining since February. In recent days this transfer of funds to private wallets has accelerated. Exchange customers have withdrawn more than twenty thousand Bitcoins over the past five days.
Despite the volatility, #Bitcoin holders appear to be withdrawing their funds from exchanges. Outflow has been increasing daily since March 18.
— glassnode (@glassnode) March 26, 2020
This decrease reverses a months-long trend of increasing deposits. In fact, exchanges still hold more than 2.3 million Bitcoins. This is more than double what they held in January 2018 when the price was at an all-time high.
MARKET TURMOIL MAY BE THE REASON
As the global economy reels from the COVID-19 health crisis, individuals are increasingly moving their assets into safe havens. After early sell-offs, investors are taking a greater interest in precious metals. Gold has moved up substantially over the past few days, and is up six percent in twenty-four hours. Likewise, Bitcoin appears to be rebounding from the major correction that took place earlier in the month.
In this environment it stands to reason that more crypto owners wish to keep their funds in personal wallets rather than trust them to exchanges. Personal key ownership is the bedrock of Bitcoin security, and thus for most investors withdrawing funds is a wise move. This fact is especially important for those that wish to hodl rather than trade.
Not your keys, not your #crypto. Never share your 24-word recovery phrase with anyone!
— Ledger (@Ledger) March 25, 2020
Other issues could also be influencing the exchange outflow. More than ever exchanges are implementing know-your-customer (KYC) policies that are widely derided by crypto advocates. Given the greater interest in this issue by regulators and governments, now may be a good time to take personal possession if one wishes to keep Bitcoin anonymously.
It is worth noting that this rush to withdraw reflects a greater trust in the long-term value of Bitcoin and other blockchain assets. By moving funds into personal wallets crypto investors clearly expect to keep their coins for a long duration. They could also be gearing up to spend it as currency should the value of fiat soon begin to decline, as many economists predict.
All investors should have a secure, personal wallet with all relevant information stored in a safe location. Experts consider hardware wallets to be best, although a number of high quality app-based and desktop wallets are also available. Also, withdrawal from exchanges should be taken with care.
Do you think the rise in Bitcoin hodl’ing is a bullish signal? Add your thoughts below!
Images via Shutterstock, Twitter @bitcoinaire @glassnode