Experts believe that the FTX debacle and the resultant market consequences have caused high net inflows from centralised exchanges (CEXs), on account of users sending their funds to personal wallets. It is believed that increased new flows from CEXs to personal wallets is considered common during price volatility but this time institutional money took the lead, as stated by Chainalysis.
According to Chainalysis, funds transition from a CEX to a personal wallet can imply either an investor is concerned about the CEX’s solvency or for continuation of their transactions. Reportedly, institutional funds constitute a bigger share of transactions between CEXs and personal wallets. It is believed that increased institutional adoption has resulted in investors playing a more active role in fund-based transactions between CEXs and personal wallets. On-chain information suggests that investors utilise funds to interact with decentralised finance (DeFi) protocols.
On the basis of information by Chainalysis, developing institutional cryptocurrency adoption implies that funds transitioning from centralised facilities to personal wallets. Reportedly, DeFi is used as a coping mechanism against market volatility and is being led by deep-pocketed institutional investors. Investors have expressed concerns around personal wallets’ relation to illegal practices, which has also been highlighted by certain lawmakers and regulators
Moreover, Chainalysis noted that from 2020 to present, under one percent of total funds sent to personal wallets have come from illicit addresses. In 2022, maximum amount of funds stolen in hacks were removed from DeFi protocols, which showed billions of dollars worth of value being lost.
(With insights from Chainalysis)
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