Short-term custodial crypto accounts soar 250% with Bitcoin ETF hype

The total assets under custodial accounts increased by 250% during the past four months amid the hype surrounding the spot Bitcoin exchange-traded fund (ETF), according to a Bitget report shared with CryptoSlate.

What spurred the growth?

Bitget attributed the surge to the broader crypto market performance and the escalating anticipation of a bull run among its users. In addition, the firm identified the integration of cryptocurrencies into daily life activities as another pivotal factor that propelled the sector’s growth.

Also, macroeconomic conditions, including regional conflicts and rising geopolitical tensions, are prompting individuals to hedge their crypto savings. Moreover, institutional interest in crypto, particularly Bitcoin and Ethereum ETFs, has spiked, fueling demand for custodial solutions.

The crypto custody market attracted significant interest following the FTX shock collapse of November 2022. More recently, developments like the launch of various Bitcoin ETF products and Binance’s regulatory challenges in the US further stimulated the sector. As a result, several traditional financial institutions like Commerzbank AG and HSBC have ventured into the industry.

Increase in short-term usage of custodial wallets.

The Bitget report identified a shift in investor behavior toward the short-term utilization of custodial wallets.

Per the report, approximately 77% of wallet holders now opt for short-term storage solutions, with only 43% re-depositing funds into their accounts. These short-term wallets, characterized by balances over $100,000 for less than three months, experienced a resurgence starting in November after a three-month lull.

Meanwhile, the surge in short-term wallet activity may not solely stem from new registrations but also from heightened trading within wallets previously used for long-term storage, coupled with investors capitalizing on profitable trading opportunities.

Notably, several larger balance accounts have transitioned to shorter retention periods, likely buoyed by the overall positive performance of the crypto market in the third quarter of last year. This emphasis on short-term wallets reflects investors’ eagerness to capitalize on their holdings for profit maximization.

Gracy Chen, the Managing Director of Bitget, said:

“The statistics underscore the dynamic nature of the crypto economy and we expect the recent approval of Bitcoin ETFs to accelerate cryptocurrency adoption further.”