Due to the growing trust crisis between exchanges and their users, investors are rapidly liquidating the majority of their positions on trading platforms and moving their money to cold storage or hot wallets. This process is known as the great migration of cryptocurrencies off of exchanges.
After the collapse of FTX, cryptocurrency exchanges have been in a real crisis as investors scramble to find ways to protect their holdings. Unprecedented volumes of Bitcoin, Ethereum, and other top-tier cryptocurrencies are leaving centralized trading platforms. Up until the end of the year, the trend might continue on the market.
Data shows that more than 1 million ETH and about 200,000 BTC worth $3.4 billion left various centralized cryptocurrency trading platforms, marking the largest outflow of funds from CEXes since 2021. Such a tendency can mean a lot of different things.
First off, a declining trend in open interest and general selling pressure on the market are frequently correlated with a declining amount of assets on exchanges. Compared to investors who store their money in exchange wallets, traders have a tendency to hold onto their money for longer, once they remove it from the open market.
How will this impact the market?
If the trend continues, the selling pressure we saw in November will return, along with the volatility. The outflow of funds from exchanges typically heralds an accumulation stage, which occurs just prior to the market’s overall recovery.
Despite the macroeconomic downturn, a cryptocurrency market recovery is still possible, even without a rally in trade markets. Making predictions and setting time frames, on the other hand, is a difficult task, especially near the end of the year.
Disclaimer: The views expressed here are not investment advice and are provided solely for informational purposes. Every investment and every trade involves risk, so you should always conduct your own research before making any decisions. We do not advise investing money that you cannot afford to lose.
