#Why are self-custody rates for Bitcoin declining?
For the first time, the rates of self-custody for Bitcoin are decreasing. Recent data indicates that individuals holding Bitcoin in private wallets now comprise roughly 49% of the total supply. This marks a significant decline from nearly 78% in late 2022, as reported by Glassnode and highlighted by Bitcoin Magazine.
#Where is the Bitcoin self-custody going?
A substantial portion of Bitcoin is now held by various investment vehicles, including Spot Bitcoin ETPs and ETFs. These funds currently possess about 1.3 million BTC, accounting for approximately 6.4% of the overall circulating supply. Additionally, public corporations have entered the fray, accumulating over 1 million BTC distributed across multiple entities, each maintaining at least 1,000 BTC.
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#What lessons were forgotten from the FTX collapse?
In late 2022, the collapse of FTX served as a stark reminder of the risks associated with entrusting third parties with your cryptocurrency. The widely accepted mantra emphasizes the importance of self-custody, urging individuals to keep their own keys to their coins.
Despite this, Trezor's analysis reveals that a mere 10% of the 600 million global cryptocurrency users are practicing self-custody. Those utilizing hardware wallets are estimated to be around 12 to 13 million, which is a mere 2% of the total user base.
#How could this impact Bitcoin investors?
This trend raises critical questions for investors about the nature of their holdings. If a custodian managing ETFs were to encounter a security breach or regulatory issues, millions of investors might find themselves owning mere shares of a fund, rather than actual Bitcoin in a private wallet. The risk profile shifts dramatically compared to the safety of a hardware wallet secured at home.
Investors should reflect on what they truly value in their investment strategies. While custodial solutions provide convenience and regulatory clarity, self-custody offers sovereignty and removes counterparty risks. Current market behavior appears to favor convenience, but the valuable lessons from 2022 should not be overlooked. Those lessons may have faded from memory but remain profoundly relevant for investors today.