Crypto Investors Rely on Hot Wallets After FTX Collapse

18. January 2023

1. The collapse of the FTX exchange sent chills to crypto investors as hot wallets gained popularity in the crypto custody space.
2. A survey by CoinWire and TK Ventures revealed that 53% of digital assets are held on Metamask, Trust Wallet and Phantom, with CEXs like Binance following closely behind.
3. Cold wallets such as Ledger and DeFi protocols account for a much smaller proportion of digital assets held.

The collapse of the FTX exchange in December 2020 has sent chills throughout the crypto industry. Investors have become wary of the security of their crypto assets, and many have turned to hot wallets as a more secure form of crypto custody. Hot wallets are digital wallets which keep a user’s private keys secure, allowing them to retain full control of their funds. This has become increasingly popular in the wake of the FTX saga.

To better understand the current state of crypto custody, CoinWire and TK Ventures recently conducted a survey of 10,200 crypto-savvy investors. The survey revealed that 53% of digital assets are held in hot wallets such as Metamask, Trust Wallet and Phantom. Centralized Exchanges (CEX) follow closely behind with more than 40%, with Binance accounting for the majority of this figure. Cold wallets such as Ledger account for 27.9%, and DeFi protocols such as BNB Chain, Ethereum and Polygon account for the lowest proportion of digital assets held at 16.8%.

These figures indicate that investors are taking a more cautious approach to crypto custody following the FTX saga. Many investors have opted to hold onto their private keys, allowing them to have full control over their funds and liquidate them whenever they choose. This has led to an increase of hot wallets as the preferred custodians of digital assets.

In response to the FTX saga, many centralized exchanges have implemented proof-of-reserves protocols to ensure that their customers’ funds are safe. Despite this, hot wallets remain the most popular choice among investors who want to ensure full control of their funds.

This survey shows that the FTX saga has had an undeniable impact on the way investors view crypto custody. With hot wallets gaining more popularity, it is likely that this trend will continue in the future.