Cryptoverse: Bitcoin investors take control

January 24 (Reuters) – Paranoia? Domino FTX and other crypto guardians are enough to make even the most confident investors grab their bitcoin and shove it under the mattress.

Indeed, net worth individuals are taking “self-custody” of their funds, moving them from crypto exchanges and trading platforms to personal digital wallets.

In a sign of this change among retail investors, the number of bitcoins held in the smallest wallets – those with less than 10 bitcoins – rose to 3.35 million as of January 11, an increase of 23% from 2.72 million that occurred a year ago, according to data. from CoinMetrics.

As a percentage of total bitcoin reserves, wallet addresses holding under 10 bitcoins now own 17.4%, up from 14.4% a year ago.

Joshua Peck, founder of hedge fund TrueCode Capital, said: “A lot of these things depend on how often you’re trading. “If you’re just going to buy and hold for the next 10 years, then it’s probably worth doing the investment and learning how to keep your assets really, really well.”

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The stampede was turbocharged by the FTX scandal and other crypto collapses, with big investors leading the way.

The 7-day average of daily movements of funds from centralized exchanges to personal wallets jumped to a six-month high of $1.3 billion in mid-November, at the time FTX fell, according to data from Chainalysis.

The data showed large investors with transfers above $100,000 were responsible for these flows.

Reuters Graphics

WHERE ARE MY KEYS?

Not your key, not your coin.

This mantra among early crypto enthusiasts, warning that access to your money is essential, regularly trended online last year as financial platforms dropped like flies.

Auto-guard is no walk in the park, though.

Wallets can vary from “hot” connected to the Internet or “cold” from offline hardware devices, although the latter typically does not appeal to first-time investors, who often buy crypto on major exchanges.

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Multi-level security can often be a cumbersome and expensive process for a small investor, and there is always the challenge of keeping your encryption key – a set of data similar to a password – without losing or forgetting it.

Meanwhile, the hardware wallet may fail, or it may be stolen.

“It’s very difficult, because you have to keep track of your keys, you have to back those keys up,” said Peck of TrueCode Capital, adding: “I will tell you it’s a very challenging prospect to do your own yourself guard for a multi. – million dollar crypto portfolio.”

Institutional investors are also turning to regulated custodians — specialized companies that can keep money in cold storage — as many traditional financial firms would not legally be able to “self-custodian” investor assets.

One such company, BitGo, which provides custodian services for institutional investors and traders, said it saw a 25% increase in subscription requests in December compared to the previous month from people looking to move their money between exchanges. , plus a 20% jump in assets. under guard

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

“One comment that stuck with me was ‘investors will forgive us for losing some of their money through our trading strategy, because that’s what they signed up for, what they won’t forgive us for being poor gatekeepers’.”

Reporting by Medha Singh and Lisa Pauline Mattackal in Bengaluru; Edited by Pravin Char

Our Standards: The Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News, which, according to the Trust Principles, is committed to integrity, independence, and freedom from bias.

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