Popular cryptocurrency exchange BitMEX, which is also the largest exchange by daily trade volume, holds about 0.18% of the total circulating supply of Bitcoin.
BitMEX’s Bitcoin gold mine
To date, 18.1 million Bitcoins have been mined of which BitMEX holds a whopping 33,449. New York-based cryptocurrency custody company, Casa’s CTO James Lopp, revealed that the exchange’s insurance fund has increased by 62% in 2019 alone. Historical data suggests that his findings are true. The BitMEX Insurance Fund held 20,776 BTC on Jan. 1, 2019. However, on December 26, 2019, the fund has grown to 33,449 BTC. It is worth over $239 million at current prices.
What is the BitMEX Insurance Fund?
The fund provides BitMEX an opportunity to avoid auto-deleveraging in trade positions. It helps alleviate unfilled liquidating orders right before the auto-deleveraging systems take over. The exchange suggests that the growth in the Insurance Fund suggests that the traders making losses will not have an unusually high downside while the winning traders continue getting their expected profits. The fund basically helps the exchange cover the losses of all traders who have lost more than their deposits.
BitMEX is not the only crypto exchange that is experiencing significant growth in its crypto holdings. Binance, another large exchange, is growing its holdings as well. In October 2019, eight prominent digital currency exchanges held about 7% of the total circulating supply of Bitcoin. This makes exchanges the biggest HODLers of the crypto community. The largest exchanges with massive crypto reserves include Huobi, Binance, BitMEX, Bitfinex, Bittrex, Bitstamp, Kraken and Poloniex.
This also suggests that users still feel more comfortable in keeping their crypto deposits with exchanges instead of their own private wallets. It could be one of the biggest security loopholes in the crypto ecosystem since all exchange wallets are hot wallets and prone to security breaches and attacks. Coincheck, a Japanese crypto exchange, suffered a multi-million-dollar hack alongside many of its peers. Even Binance suffered an attack that led to BTC theft from the exchange.
However, despite this, users continue to keep their crypto holdings with exchanges while these giant companies keep filling their coffers with more Bitcoins for added liquidity.