Cryptocurrency exchanges are now responsible for holding 10 percent of all Bitcoin (BTC) in circulation, according to data presented by on-chain intelligence firm Glassnode. The amount of BTC stored on exchanges has increased by more than 700 percent over the last three years.
Bitcoin is getting more centralized
Charles Edwards of Capriole Investments recently shared his take on the new milestone for cryptocurrency exchanges, claiming that Bitcoin is getting “exponentially centralized.” If this trend continues, it could lead to the institutionalization of Bitcoin as one of the possible outcomes.
San Francisco-based juggernaut Coinbase alone now controls five percent of Bitcoin’s circulating supply after acquiring Xapo back in August. The exchange, which also successfully ventured into cryptocurrency custody, goes an extra mile to protect the coins of its customers. As reported by U.Today, it prints private keys in a Faraday tent to prevent potential hacks.
Trace Mayer has to try harder
Back in November, Trace Mayer, the leader of the #ProofOfKeys movement, urged Bitcoiners to abandon exchanges and take control of their private keys. In 2019, more than $292 mln worth of crypto was stolen from multiple exchanges, including Binance.
However, considering that exchanges continue to ramp up their holdings, it seems like very few users are security-cautious enough to withdraw their BTC from exchanges. This mainly has to do with the fact that there is no way to conveniently trade digital assets from software wallets or hardware wallets.