Cryptocurrency

Over $223bn of cryptocurrency has moved off-exchange

*This content is brought to you by Jaltech

Owners of assets like gold, silver, and fiat money go to great lengths to protect their assets from theft, damage, and loss. Whether stored physically or digitally, a key or password is required to gain access to these types of assets. Those keys and passwords are often secured by highly reputable and credible custodians like banks, who have been storing and protecting their clients’ assets for hundreds of years.

As a consequence of billions of Dollars in hacks, theft and forgotten passwords, long-term cryptocurrency investors are moving their cryptocurrency off-exchange. By way of example, cryptocurrency exchanges during 2022 have seen a 20% drop in their bitcoin balances according to Glassnode research – a clear indicator that long-term investors are taking custody of their bitcoins by removing them from their exchange accounts.

For information about Jaltech’s Off-exchange Cryptocurrency safety deposit box, click here.

The off-exchange momentum has been fuelled by banks such as BNY Mellon, BNP Paribas, and U.S. Bank who are offering off-exchange custody services to their clients. It’s no surprise that these banks are beginning to offer these services – a report by Blockdata indicates that the size of digital assets under third-party custody has grown from USD 32 billion in 2019 to USD 223 billion in 2022.

The growth in digital assets under third-party custody is a sign that long-term investors are aware of the inherent risks of holding their investments on cryptocurrency exchanges.

Why are long-term cryptocurrency investors moving off-exchange?

Cryptocurrency exchanges generate revenue from every trade taking place on their exchange, thus they are not incentivised to encourage or offer investors an off-exchange custody solution. As a consequence, criminal cyber-attacks and phishing attempts are becoming common in this sector.

Exchanges are often referred to as “honey pots” because they have a large amount of cryptocurrency stored in a central location which, if successfully hacked, results in a huge payday for criminals. Losing funds through hacking is a serious concern for cryptocurrency investors, with 2022 seeing over USD 2 billion in losses from cryptocurrency exchange hacks so far.

Who should be using off-exchange custody services?

The need for off-exchange custody services is dependent on several factors such as (to name a few); the intended investment term; the relative amount invested and the need for liquidity. In other words, if an investor is looking to frequently buy and sell cryptocurrency, has invested a small amount relative to his/her personal wealth and because of the frequency of trading needs to be able to sell or buy cryptocurrency on a whim, one would suggest that holding cryptocurrency on an exchange is necessary particularly given the small relative value being on the exchange.

For information about Jaltech’s Off-exchange Cryptocurrency safety deposit box, click here.

If an investor falls in the long-term investor category and isn’t looking to sell cryptocurrencies frequently, removing their cryptocurrencies from an exchange would make sense regardless of the investment value as long-term investors in our view shouldn’t be adding cryptocurrency exchange risk to their list of risks.

What is Jaltech’s solution?

Jaltech offers investors a safer alternative storage option to holding their cryptocurrencies themselves or on a cryptocurrency exchange. Jaltech’s Cryptocurrency Safety Deposit Box is underpinned by Fireblocks, the worlds leading cryptocurrency storage provider, whose security technology is designed to secure cryptocurrency from cyber-attacks, internal collusion, and human error.

On top of the world-class technology partner, Jaltech’s solution requires an independent party or parties to approve withdrawals, adding a further layer of security. Finally, by holding their cryptocurrency in Jaltech’s Cryptocurrency Safety Deposit Box, investors not only secure their assets but also ensure their heirs and financial advisor have access to the cryptocurrencies as a contingency if the need ever arises.

Investors who hold a significant amount of cryptocurrency and plan to do so for an extended period of time should strongly consider safeguarding their assets with a trusted team and a highly secure, battle-tested technological solution. 

Chris McCormick / Jonty Sacks – Jaltech Fund Managers

Jaltech offers private individuals, institutions, and corporates a seamless, cost-effective, and safer alternative storage option to holding cryptocurrencies themselves or on a cryptocurrency exchange.

For information about Jaltech’s Off-exchange Cryptocurrency safety deposit box, click here.

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