The unforeseen collapse of FTX has sent shockwaves through the crypto community, with varied responses ranging from offloading assets to moving assets from exchanges to a self-custody wallet.
Bitcoin fell sharply after news that FTX had come under acute stress, with a decline going as far as $15,675. This collapse was the most shocking collapse of a custodian in recent times.
The resultant panic resulted in investors preparing for the worst, a further market decline
The rifest response has been to mitigate future losses by withdrawing BTC and ETH from crypto exchanges into self-custody wallets as firms have failed to keep their promise of keeping funds safe.
“FTX leveraged its clients’ money and lost millions. Self-custody is one solution to protect yourself,” Crypto-friendly Rep. Warren Davidson (R-Ohio) tweeted late Wednesday.
Data showing Bitcoin’s Exchange Net-Position Change shows that exchanges are faced with one of the largest net declines in aggregate BTC balance in history, with a fall of nearly 80,000 in the last 7 days.
This comparable to only three periods in history; April 2020, November 2020, and June -July 2022.
Similar sentiments echoed across the board to Ethereum, in the last week 1.101 million ETH has been withdrawn from exchanges to self-custody wallets.
“This makes for the largest 30-day balance decline since September 2020 during the peak of “DeFi Summer”, where the demand of Ethereum was sky high for use as collateral in smart contracts,” the firm added.
Though the FTX event is still unfolding, the situation could be mitigated by a bailout. Despite a sharp plunge this week, Bitcoin has defied bear pressure in the past week, attributed to mass exchange outflows.