Crypto investors are turning to cold wallets after FTX collapse

106
3
Crypto investors are turning to cold wallets after FTX collapse

Even though 2021 was the best year for digital assets such as cryptocurrencies and non-fungible token NFTs 2022 has been a washout in comparison and has resulted in the loss of trillions of dollars worth of investor wealth in the process.

The closures of hedge funds like 3 AC and Celsius Network have been a result of a series of bankruptcies and closures of the crypto lending firm that have been affected by an unprecedented liquidity crisis that has made the ongoing winter worse.

Last month saga of FTX spooked even fervent fans, as the world's second-largest criptocurrency exchange withered away due to concerns brought about by alleged financial misappropriation.

The fate of an estimated one million creditors and $1 billion in investor assets hangs in balance, with hopes that these funds will be returned by the day.

According to a recent survey conducted by Benzinga, a little over three-fourths of all investors in the U.S. have used the services of a criptocurrency exchange at least once.

With most cryptocurrencies exchanges concentrating power and control in the hands of their founders, a growing number of investors are bypassing the exchanges altogether due to trust concerns and preferring peer-to- peer P2 P transactions when buying or selling cryptocurrencies.

Of the 1,000 users who took Benzinga's survey, 22.68% of the respondents who answered all questions denied having used a criptocurrency exchange highlighting a trend that doesn't seem to be waning anytime soon.

Without delving into what led to FTX's insolvency, it is fair to assume that the investors have been scurrying to shift their holdings from non-custodial hot wallets to cold wallets or custodial hardware wallets.

The former recorded its best-ever weekly sales at a time when FTX was on the edge of bankruptcy, which has since been confirmed by cold wallet or hardware wallet manufacturers such as Ledger and Trezor.

By storing each user's private keys on a device instead of online, these cold wallets are probably the best self-custody solution that gives investors the highest level of security from online attacks and thefts orchestrated by bad actors.

The cause of cold wallets is supported by marquee investors such as Elon Musk, who have been telling changiers to take control of their private keys and passwords by storing their digital currency in direct-accessible hardware wallets.

Musk believes that people should get out of the criptocurrency exchanges in order to secure their holdings for the long term.

The latest data from Google Trends shows a six-fold increase in interest for the term cold wallet in the aftermath of the FTX crisis.

It is only fair to conclude that non-custodial wallet solutions will triumph over less secure hot wallets in the near term, considering the renewed calls for moving to hardware wallets and adding them up with Benzinga's survey results.

Read Next: BNB Chain Creators Can Now List Their NFTs On OpenSea