FTX’s collapse led to the largest-ever outflow of bitcoin from crypto exchanges, with investors withdrawing $1.5 billion last month
In November, investors withdrew nearly $1.5 billion in bitcoin from crypto exchanges.
The fallout from FTX’s collapse has rocked the crypto market, and November’s bitcoin outflows were the highest ever.
Bitcoin is down about 63% in 2022, falling from an all-time high of $69,000 in November 2021.
The implosion of FTX has led to a record amount of bitcoin outflows from cryptocurrency exchanges, as the episode shakes the digital asset sector and undermines confidence in centralized platforms.
According to a Monday Financial Times report citing data from CryptoCompare, investor withdrawals of bitcoin were the highest ever in November, with 91,363 tokens worth nearly $1.5 billion taken from exchanges including Kraken, Coinbase and Binance. It is unclear whether these cryptocurrencies were sold or transferred to private wallets, the report said.
Meanwhile, in the first week of December, investors withdrew 4,545 bitcoin from centralized exchanges, up from 3,846 in the same period in 2021.
Bitcoin has fallen about 63% so far this year. It was trading around $17,000 on Monday, after reaching a peak of around $69,000 in November 2021.
The fall of former FTX Group CEO Sam Bankman-Fried has renewed concerns about the safety of user funds held in centralized exchanges. Global regulators are closing in on Bankman-Fried and FTX, and the once-designated crypto king is set to testify before Congress this week.
All of this has weighed on public confidence in crypto, and traders have become more cautious about security.
John Ray III, who took over FTX and was responsible for taking Enron through bankruptcy after its spectacular collapse, said FTX lacked basic risk management and accounting. Commentators have compared the FTX fiasco to crypto’s Lehman Brothers.
In an effort to both restore faith in the sector and differentiate itself from FTX, rival exchanges have turned to so-called proof-of-reserves audits, a tactic intended to increase transparency and show clients that their money is not on loan.
However, experts say the problem with proof-of-reserves is that it is more of a snapshot rather than a comprehensive overview of risks, and it can be misleading. The report does not reveal asset movements in and out, nor does it show liabilities against assets.
“The industry needs to mature before it can recover, whether this comes from improved government policies on how to interact with crypto, or more sophisticated asset managers handling the movement of large sums of assets,” David Siemer, CEO of Wave Financial, previously told Insider . “It is absolutely clear that companies and platforms can no longer get away with hiding their reserves and keeping not only investors but also consumers in the dark.”
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