With cryptocurrencies still in their nascent stages of development, security is always a primary concern. As such, more bitcoin holders are migrating their cryptocurrencies from a public exchange to offline storage or “cold” storage.
More Bitcoin holders are heading to cold storage
Strong sell-offs in the cryptocurrency market have forced the way investors think when it comes to keeping crypto safe. A number of companies have gone bust, leaving investors wondering if their crypto is safe on a public exchange despite growing confidence over the years.
“Developments across the crypto market in 2022 have forced many to re-evaluate their risk management practices, as collapsing decentralized financial protocols and bankrupt centralized financial platforms have highlighted the truth of not your keys, not your crypto,” a Kitco News article said.
“As a result of funds being locked up or lost, Bitcoin holders have embarked on a mission to withdraw their tokens from exchanges at an astounding rate, with the month of May being the only exception in all of 2022,” the article added .
The start of 2022 saw a trickle of selling and finally peaked in June as the crypto market followed stocks on the decline. While the crypto market has stabilized recently, there still seems to be a steady stream of migration from exchanges.
“June saw a net outflow from exchanges of 119,000 bitcoin, the highest outflow since November 2020. July saw massive outflows, with 96,000 bitcoin withdrawn from exchanges. The exchange has continued in August, with a net 65,000 bitcoin withdrawn in the first 22 days of the month, Arcane Research said.
As an alternative to placing bitcoin on a public exchange, investors can also choose to gain exposure to futures contracts in bitcoin via ProShares Bitcoin ETF (BITO ). With cryptocurrency regulation still in its infancy, BITO will allow investors to gain bitcoin exposure on a traditional market exchange, thereby reducing the risk of a public exchange going out of business.
Furthermore, BITO is actively managed, giving investors dynamic exposure to the bitcoin futures market. This puts portfolio management in the hands of market experts who can increase or decrease exposure to contracts given the current nature of the ever-changing, volatile crypto market.
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