Opinions expressed by Entrepreneur contributors are their own.
Bitcoin holders are shying away after the dramatic collapse of the FTX cryptocurrency exchange, according to blockchain analysts at Glassnode. Bitcoin (BTC) withdrawals hit a record rate of 106,000 monthly, indicating that customers may be losing trust in third-party services.
Glassnode tweeted that there were three other periods with similar withdrawal patterns in recent years, April and November 2020 and June to July 2022, when combined factors – including the Russian invasion of Ukraine and the failure of the Terra LUNA stablecoin – triggered the crypto market nose dive.
This compares to only three other times:
– April 2020
– Nov 2020
– June-July 2022 https://t.co/92aYVYU4Yt pic.twitter.com/em7CsDBWUf
— glassnode (@glassnode) November 13, 2022
In the past, similar outflows sometimes signaled a bull run. In this case, it is much more likely a sign that investors have lost faith in big-name exchanges. As Markets Insider noted, these actions suggest crypto investors are rethinking how to manage their digital assets now that the once-third-largest crypto exchange in the world has faltered and the value of the fortune built by FTX founder Sam Bankman-Fried [has] is now cleared to $1.”
CoinEdition quoted Hong Kong Digital Asset Operations Manager Alan Wong as saying that after FTX “things will continue to simmer” and that with an $8 billion gap “between liabilities and assets, when FTX is insolvent, it will have a domino effect causing a series of investors associated with FTX to go bankrupt or be forced to sell assets.”
Reuters reported on Monday that FTX is being investigated by an alphabet soup of agencies, including the US Department of Justice and the Securities and Exchange Commission. As of 11:30 Monday evening, Bitcoin was trading at $16,770 after falling below the $16,000 mark earlier in the day.