U.S. Investors Abandoning Crypto Exchanges, But Where Are They Going?

Crypto News: According to on-chain data, the Bitcoin exchange reserve ratio for US vs offshore platforms has been declining recently. This comes in the midst of a rampant regulatory crackdown on businesses offering crypto services in the United States — which seems to have shaken investors’ confidence in the market.

Bitcoin Exchange Reserve Ratio Drops

As noted by an analyst in a CryptoQuant report, the BTC reserve of the US-based exchanges has been decreasing. The “exchange reserve ratio” is the relevant indicator in this case rather than the actual exchange reserve. This indicator provides information about the ratio between the exchange reserves of two specified sets of platforms, as its name suggests. According to the on-chain data shared, the American and international crypto exchanges are the two sets of exchanges being compared.

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When the value of this ratio rises, it indicates that there are more coins available on US-based platforms than there are on offshore exchanges. This logically implies that American platforms are receiving more deposits or in other words, lesser withdrawals than those from other countries. However, the metric’s declining value indicates that global platforms are currently experiencing a greater increase in their reserves than US-based exchanges.

The Bitcoin exchange reserve ratio for these two groups of sites has been declining since the first half of 2022, as shown in the graph above. This suggests that in comparison to overseas platforms, the supply on US-based exchanges has been steadily falling. At the time of writing, Bitcoin’s price is currently exchanging hands at $27,984.12 with a market cap of $541 billion.

Fear Brews As Crackdowns Widen

While U.S. investors are limited to using crypto platforms outside of their jurisdiction, it’s assumed that most are switching to decentralized exchange protocols or storing their crypto in self-custody crypto wallets in order to safeguard from unseen failures or collapses. Multiple reports have indicated that, the use of DEXs such as Uniswap, Quickswap & Pancake Swap has grown in recent times along with the use of hardware wallets.

The downfall in user trust has been especially severe after large collapses, which have led to the bankruptcy of some key platforms and the spread of FUD throughout the crypto market — thereby causing investors to withdraw their coins from centralized exchanges. The February proposal to bar financial advisors from dealing in cryptocurrencies and the possibility of legal action against certain Coinbase products are recent instances of the SEC’s enforcement actions.

Moreover, in the latest crypto news, SPAC King Chamath Palihapitiya famously stated “Crypto is dead in America”.  This comes after the SEC Chair Gary Gensler blamed the entire banking crisis solely on crypto. “The United States authorities have firmly pointed their guns at crypto”, he further added.

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