Bitcoin is now cresting in the midst of a huge rally that seems to have no letdown in sight yet, and the attention must surely turn to the Bitcoin whales at some point, especially with regards to security and the safety of their funds.
But strangely enough, current data from Binance Research seems to suggest that even with more secure options available to institutional investors and wealthy Bitcoin owners, accounts with large Assets Under Management (AUM) or those with more than USD 25 million in digital assets are still preferring the services of exchanges, instead of custodial services or even their own wallets, either hot or cold.
This data from Binance looks at Q2 2019 and finds that the top four methods were exchanges, followed by cold wallets, hot wallets and then custodial services such as BitGo.
Binance itself, although one of the world’s most popular exchanges, self-described as having some of the best security features in the industry, has been a victim of cyber attacks, losing funds in the process. Binance was fortunate enough to cover the losses after the hack this year with funds set aside for exactly such emergencies. But other exchanges like Cryptopia and QuadrigaCX have not been so lucky, with hacks — alleged or otherwise — spelling their end as they both now are embroiled in expensive litigation battles with former clients now turned creditors.
The Binance Research report shows that clients still end up storing funds on exchanges, although “partially” stored in cold wallets via “third party custody services”.
The biggest reason for this is that they trade “high turnover” digital assets and simply choose to avoid deposit and withdrawal fees, as well as commissions for transactions:
“One of the potential explanations is that market participants with high turnover buy/sell frequently digital assets and need to keep funds on exchange as the exchange platforms typically charge some additional fees to withdraw along with better liquidity of centralized exchanges.”
Custodial borrowing and lending platforms were only used by a third of clients surveyed, but these tend to have a longer-term view than traders.
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