Binance Overtakes Coinbase In Bitcoin Balances; Investors Withdraw BTC From Coinbase Amidst Liquidity Fears

What Happened: Data analytics platform Glassnode shows Coinbase Global Inc’s COIN Bitcoin BTC/USD balance has decreased from over 1 million bitcoin in 2020 to less than 600,000 bitcoin today. The decrease has led to crypto exchange Binance now holding more BTC than Coinbase.

After Coinbase sent an email out to marketers notifying them that its affiliate program will be halted, rumors circulated the internet that Coinbase may face insolvency, following the insolvencies of Voyager, Celsius, and a number of other cryptocurrency exchanges.

The key difference between Coinbase and insolvent exchanges is how the entities store user funds. According to Coinbase, 98% of digital assets owned by those who use Coinbase are held in cold storage.

Cold storage is the safest way to store digital assets, as it's held in physical hardware, disconnected from the internet. Conversely, Voyager and Celsius lent user funds to other firms, and these firms are now unable to pay back investors.

Why It Matters: Cryptocurrency enthusiasts often tout ‘Not your keys, not your crypto,’ referring to digital asset ownership via custodial ownership. Centralized exchanges, such as Coinbase, Robinhood Markets Inc HOOD, and eToro, control users’ assets, presenting a level of risk not seen by non-custodial crypto wallets.

By managing one’s own private keys, investors have full control over their crypto assets. Given recent market conditions, investors are turning to cryptocurrency hardware wallets for increased security - both for NFTs and fungible token investments.

See Also: Best Cryptocurrency Hardware Wallets

Benzinga's Take: Coinbase will likely come out of the cryptocurrency bear market alright, while smaller firms may struggle. Coinbase has survived through past bear markets, and the exchange is relatively risk-off compared to the likes of Celsius, BlockFi, and other cryptocurrency platforms.

However, users who want full control over their digital assets need a custodial cryptocurrency wallet to have their funds completely secured.