Crypto Exchange Liquidity Issues and Freezing Assets in 2022
On June 13, 2022 global crypto lender Celsius stopped all withdrawals across its network, freezing $12 billion in investor money through the move. As of October 5, 2022 this is still not resolved:
The fate of customers and their deposits is one of the biggest unanswered questions in the Celsius case. And amateurs being last in line to get repaid, behind pros backed by an army of lawyers and bankers, is not exactly an unfamiliar story in bankruptcies. – Celsius’ Crypto Customers Face Big Obstacle in Trying to Claw Back Their Deposits – Coindesk 10/5/2022
More platforms like Finblox and Babel Finance followed suit (though certainly not all). Months later, not everything has been resolved. Eight years after the infamous 2014 Mt. Gox hack in which 850,000 Bitcoin were stolen, that is still unresolved. I’d rather not be in that boat, you?
And regulation is coming. Government wants a piece. This was meant to be a decentralized asset. Now you can buy Bitcoin in Venmo. Where do you see this puck headed?
1. How many people hold bitcoin?
There is no definitive way to determine how many bitcoin users there. But:
- Business Insider Intelligence estimates that there will be more than 25 million bitcoin owners by the end of 2022, a 16.7% growth over last year.
- Conversely, a survey conducted in 2021 by the New York Digital Investment Group found that roughly 22% of the US adult population, 46 million Americans, own bitcoin.
- Responses were received from 1,050 participants with incomes above $50,000 and a margin error of 3.1%, which is regarded as statistically significant.
- Another report from Gemini in 2021 had a larger sample of 3,000 people but estimated only 21.2 million people own cryptocurrencies.
- In the same report released in 2022, it says one in five people in the US own cryptocurrencies, which implies 20% of the current US population of 332, 403,650. That is 66,480,730 people owning cryptocurrencies. (As of September 2022.)
- The report didn’t specify the cryptocurrencies, but we can reasonably expect that at least 50% hold bitcoin, which is more than 33 million bitcoin owners. (Via cryptonews.com)
2. Why do I care about crypto?
I’m not a crypto expert but I’ve held Bitcoin since 2017 and bought more BTC and ETH at a wide range of prices since then. I support the concept of decentralized money and DeFi. We have voice marketing customers on WealthVoice in the crypto and financial advice space and I’ve been inspired by following experts like my friend Tyrone Ross.
I like placing early bets. I like hedging my bets. I like money. I am excellent at delaying gratification. There are tons of reasons.
3. What prompted me to look into cold storage?
Recent events in the crypto market concerned me. I bought the Trezor wallet in July 2022 and had most of my assets transferred by late August after doing several small tests.
The process had a real learning curve and was a bit stressful, so I wanted to document it for you since you may be curious about how to go from a crypto exchange into a hardware wallet but feel overwhelmed by the massive amounts of information and forums on the topic. Plus, as with many personal finance and business processes that I go through and make content about, I found the existing FAQ and instructions lacking. This is for you.
What is a cryptocurrency exchange?
A cryptocurrency exchange, or a digital currency exchange (DCE), “is a platform for buying and selling cryptocurrencies. In addition to trading services, crypto exchanges also offer price discovery through trading activity, as well as storage for crypto.
Before crypto exchanges, people were only able to acquire crypto through mining or by organizing transactions in various online and offline forums. Today, there are hundreds of crypto exchanges offering an array of digital assets and varying levels of security and associated fees. It’s up to you to find the exchange and digital assets that suit your particular needs, price range, and security expectations.” –Gemini
Popular crypto exchanges:
“Some brokerages which also focus on other assets such as stocks, like Robinhood and eToro, let users purchase but not withdraw cryptocurrencies to cryptocurrency wallets. Dedicated cryptocurrency exchanges such as Binance, Coinbase, and BlockFi do allow cryptocurrency withdrawals however.” –Wikipedia
Factors to consider:
“When choosing a cryptocurrency exchange, it’s important to look at factors such as supported assets, fees, payment methods, and security. We considered these factors when selecting this list of the best cryptocurrency exchanges.” –Investopedia
The downside to crypto exchanges
Trezor has an excellent blog post explaining more:
When you buy through Binance, Celsius, Coinbase, or other custodial exchanges, they are free to use your money as they wish. Until you withdraw to self-custody (e.g. cold storage in your own wallet), there is no guarantee that they ever even hold the assets that you paid for, while they could be using your funds to buy high-risk assets or invest in sketchy protocols to try to turn a profit before you decide to withdraw. –Trezor Blog
Cold Storage Wallet Setup and Transfer
Trezor Model T Wallet Setup video below covers:
- Trezor Model T wallet setup (first time user: hardware wallet and Trezor Suite desktop software)
- How to transfer crypto from an exchange (I demo moving Bitcoin from BlockFi to Trezor)