Bitcoin Self-Custody Holdings Surpass ETFs and Treasuries by Nearly Threefold

A recent report by River Financial has highlighted a significant trend in the Bitcoin market: self-custodied Bitcoin holdings have now surpassed $800 billion, nearly three times the approximately $300 billion held by spot Bitcoin ETFs and corporate treasuries.

According to the report, individuals control about 65.9% of the circulating Bitcoin supply, which translates to around 13.83 million BTC stored in non-custodial wallets. This trend indicates a growing preference among Bitcoin holders to manage their own keys rather than rely on custodial services.

The report also notes a decline in Bitcoin held on exchanges, suggesting that many users who initially purchase Bitcoin through centralized platforms are increasingly opting to withdraw their assets to personal wallets. River Financial, which specializes in Bitcoin services, currently custodies over 25,000 BTC for its clients, positioning it among the top exchanges and ETFs in terms of held assets.

The importance of self-custody has been underscored by the collapse of several custodial platforms, including FTX, which highlighted the risks associated with third-party custody. In regions with unstable banking systems, self-custody is often a necessity rather than a choice.

This trend has implications for market dynamics, as the effective supply of Bitcoin available for trading is significantly lower than the total supply of approximately 19.8 million coins. Investors and institutions may need to adjust their strategies to account for this reality.

New Insights on Bitcoin Self-Custody

• Following the Coldcard firmware exploit, approximately 233k BTC was moved to safety, showcasing the resilience of self-custody.
• In the aftermath of the hack, 22k BTC moved to exchanges, indicating a significant response from holders.
• Galaxy Research estimates confirmed losses from the Coldcard exploit range from 1.7k to over 2k BTC, with higher estimates nearing $130 million.
• The vulnerability originated from a March 2021 firmware issue affecting certain Coldcard models, weakening seed generation.
• Many holders shifted from single-key setups to multisig wallets, reflecting a reassessment of risks associated with single-key storage.
• Neuman emphasized that self-custody not only protects individual holders but also enhances the overall resilience of the Bitcoin network by distributing risk.
• The Coldcard incident has reignited discussions on the effectiveness of single-signature hardware wallets versus multisig solutions.