Introduction
The world’s largest cryptocurrency exchanges saw a record $2.8bn of withdrawals from traders in the past month, as fears grew over the financial viability of the platforms. The funds were pulled from leading crypto exchanges such as Binance and Huobi over a 30-day period starting on May 10, according to data from crypto analytics firm Chainalysis. By contrast, traders withdrew $1.4bn from crypto exchanges in February, when crypto prices experienced their last major sell-off…
The world’s largest cryptocurrency exchanges saw a record $2.8bn of withdrawals from traders in the past month, as fears grew over the financial viability of the platforms.
According to data from CoinMarketCap, a cryptocurrency price tracker, the world’s largest crypto exchanges have seen a record $2.8bn of withdrawals over the past month. This is an increase of more than 500% compared with last year and dwarfs amounts withdrawn in previous years and months.
According to analysts at Autonomous Research, investors are taking their coins out of exchanges because they fear that regulators could crack down on them or that they’re worried about exchange security following recent high-profile hacks such as Coincheck’s theft of $530m worth of NEM cryptocurrency tokens earlier this year or Bithumb losing $30m in customer funds last year.
The figures also show an uptick in people moving their funds into “cold storage” – offline wallets not connected to the internet – instead of leaving them on exchange websites for easy access through online trading tools such as margin trading accounts where you borrow money from someone else so you can buy more coins than you otherwise would be able to afford using just your own cash reserve (this practice was banned by some US regulators earlier this year).
The funds were pulled from leading crypto exchanges such as Binance and Huobi over a 30-day period starting on May 10, according to data from crypto analytics firm Chainalysis.
Binance and Huobi, the two largest crypto exchanges in the world, both saw record outflows of funds over a 30-day period starting on May 10, according to data from analytics firm Chainalysis.
The funds were withdrawn by investors through credit cards and wire transfers. This is the largest ever amount withdrawn from these online exchanges in a single month since 2012 when Bitcoin was first launched as an alternative financial system.
By contrast, traders withdrew $1.4bn from crypto exchanges in February, when crypto prices experienced their last major sell-off.
By contrast, traders withdrew $1.4bn from crypto exchanges in February, when crypto prices experienced their last major sell-off. This is interesting because it was also around this time that Bitfinex and Tether were under investigation by the New York Attorney General’s office.
So what does this mean? Well, both the current decline and last year’s sell-off happened at a time when there was uncertainty around whether these exchanges would be able to repay customers’ funds if needed – and it seems investors are still worried about this possibility.
The withdrawals began after New York state’s attorney general launched an investigation into trading at Bitfinex and Tether, two companies that are run by executives at the same time and whose investors have been linked in several research reports to the manipulation of bitcoin prices.
After the attorney general’s office launched an investigation into trading at Bitfinex and Tether, investors began withdrawing coins from crypto exchanges. The withdrawals began after New York state’s attorney general launched an investigation into trading at Bitfinex and Tether, two companies that are run by executives at the same time and whose investors have been linked in several research reports to the manipulation of bitcoin prices.
The decision by the attorney general’s office came just weeks after QuadrigaCX, Canada’s largest exchange, collapsed after its chief executive died with the only password to unlock $145m in cryptocurrencies it was holding for clients.
“QuadrigaCX is Canada’s largest exchange and its collapse has left nearly $145m in cryptocurrency frozen. The decision by the attorney general’s office came just weeks after QuadrigaCX, Canada’s largest exchange, collapsed after its chief executive died with the only password to unlock $145m in cryptocurrencies it was holding for clients.
The Canadian authorities said on Monday they were investigating a claim made by a former employee of QuadrigaCX that “significant sums” may be missing.”
“The uncertainty around Bitfinex and Tether has caused people to reconsider what they do with their money,” said Kim Grauer, senior economist at Chainalysis. “It is likely the largest exchange by volume has some of its bitcoin in cold storage or on other exchanges.”
There are two types of storage: a hot wallet, which is connected to the internet and therefore can be hacked, and a cold wallet—which is not. In some cases, if an exchange has its funds in an offline cold wallet and the server gets compromised by hackers (or even through a simple software bug), it’s possible that all the funds will be stolen.
The other option is for exchanges to have their own private keys for each customer’s account so that only the owner can access them—and no one else has access to their coins at all. But this isn’t always possible because many exchanges aren’t able or allowed to hold people’s private keys due to regulations from regulators like FINRA or EU Mifid II; as such they may need third parties who specialize in keeping digital currencies safe as part of regulatory compliance guidelines.
Conclusion
In conclusion, we can see that the crypto market is still volatile, but there are some positive signs. The year has started off with a slow start, with many investors taking a wait and see attitude. That being said, if these trends continue throughout 2019 we could see a record-breaking year for cryptocurrency trading.
