Investors have withdrawn record amounts of bitcoin from cryptocurrency exchanges since the FTX crash last November.
FTX, once a darling of the crypto industry, filed for bankruptcy protection in mid-November after losing about $8 billion in repaying customers. FTX founder Sam Bankman-Fried, who was arrested on Dec. 13 on fraud and money laundering charges, acknowledged weak internal controls.
It is estimated that more than 1 million “creditors” of the collapsed exchange lost assets deposited with the exchange. Therefore, the FTX crash also raised concerns among investors holding assets on other centralized cryptocurrency exchanges, leading to a large withdrawal of assets.
In November, investors withdrew more than 91,000 bitcoins from centralized exchanges such as Binance, Kraken and Coinbase. Based on an average bitcoin price of about $16,400 in November, those bitcoins are worth about $1.5 billion in total.
According to CryptoSwap, this is the largest bitcoin inflow on record. It is unclear whether the coins were sold or held in private wallets. Bitcoin prices have fallen 64% this year and are currently trading around $17,000.
Bitcoin withdrawals have also topped 75,000 BTC since October, when traders withdrew assets following the Celsius and Voyager Digital crashes.
Centralized exchanges like Binance and Coinbase are still seeking to differentiate themselves from FTX, for example by promising proof-of-liquidity to ease customer anxiety and limit the “domino effect.” “.” in the cryptocurrency market. cryptocurrency market.
However, recent record bitcoin withdrawals suggest that investors are losing faith in exchanges and becoming cautious. In the first seven days of December alone, more than 4,500 bitcoins were withdrawn from centralized exchanges. According to CryptoSwap data, there were just over 3,800 in the same period last year.
Sam Bankman-Fried and FTX are also affecting the crypto market in other ways. Credit ratings agency Moody’s said it took this into account when it downgraded Coinbase’s U.S.-listed bonds.
The ratings agency cited “significant changes in trading volumes and client engagement” and “risks of further downside”.
“Falling crypto asset prices will limit companies’ ability to raise capital and reduce client demand,” Moody’s analysts said.
“An increasing number of cryptocurrency companies and exchanges are finding themselves illiquid, leading to bankruptcy and undermining investor confidence in digital assets,” said Eric Robertson, head of the unit. number. digital. Standard Chartered’s global research focuses primarily on Asia.