Stablecoins have been leaving exchanges in large numbers over the past month. Since November 4, stablecoin balances have dropped by a net of $4.67 billion. This represents an 11.4% decrease in exchange stablecoin balances.
During the same time period, net Ether outflows from exchanges added up to $5.125 billion, which is 13.1% of the total Ether held on centralized exchanges (CEXs). In total, $9.8 billion in stablecoins and Ether have been withdrawn from CEXs since November 4.
Self custody
Because cryptocurrency investors are getting more worried, there is more demand for secure storage that doesn’t involve a third party. Many in the crypto community are worried that popular exchanges like Binance may go bankrupt, and as a result, the trend of withdrawals from CEXs is likely to continue.
In recent weeks, there has been a sharp increase in the number of people taking their crypto assets off exchanges (CEXs) and into self-custody solutions.
What is “self custody” in crypto?
Self-custody in cryptocurrency is when an individual investor chooses to store their own cryptocurrency rather than relying on a third party, such as an exchange or wallet provider, to store and secure it.
Self-custody is attractive to investors because it gives them full control over their digital assets, making it easier to secure their investments against hacks or other malicious activities
PoR audits
Even the most advanced auditing tools available today don’t give users of CEXs the level of confidence they need. Proof of Reserves audits, for example, only take a snapshot of assets at a certain point in time and don’t update balances or keep track of liabilities in real time.
This has made people wonder about the quality of crypto exchange auditors, with some saying that smaller firms might not have the resources to do thorough audits of exchanges.
To stop the trend of capital leaving CEXs, exchanges will need to win back the trust of their customers, which may be hard in a crypto market where people are becoming more skeptical of centralized custodians. To do this, exchanges will have to go above and beyond the typical auditing processes by not just providing proof of reserve audits but also live updates of asset balances.
© 2024 Cryptopress. For informational purposes only, not offered as advice of any kind.
