Data from on-chain crypto information aggregator Glassnode indicates the number of Bitcoin held on centralized exchanges has fallen by roughly 20% in 12 months.
The data suggests investors are accumulating BTC and withdrawing them from exchanges into cold storage, creating a supply crunch.
#Bitcoin Balance on Exchanges taking another dive pic.twitter.com/F20tohfXsu
— William Clemente III (@WClementeIII) March 7, 2021
On March 6, Glassnode also shared data revealing that coins purchased during 2021 were not moved at a loss during the late February dip, according to on-chain analysis.
The firm’s “Hodlwaves” metric, which measures the time since coins were last moved on-chain, also points to increasing accumulation activity. Hodlwaves data published on Feb. 22 indicated 57% of Bitcoin’s supply has not moved in more than one year. However, more than one-third of said BTC have not moved in more than five years, suggesting that a significant portion of the coins may have been lost.
The increasing popularity of decentralized exchanges and DeFi yield protocols may also be driving the diminishing supply of BTC on centralized exchanges.
Evidencing strong demand for Bitcoin in the DeFi ecosystem, the total value locked, or TVL, of BTC tokenization protocol Wrapped Bitcoin has increased by more than $1 billion since the start of March, according to DeFi Llama.
Some retail equities traders, frustrated with recent restrictions on stock buying on trading platforms including Robinhood, are turning their attention to centralized and decentralized cryptocurrency exchanges (CEX and DEX, respectively), according to new data. That’s helping to drive several of these exchanges’ tokens to new highs.
Last week GameStop (GME) and and other stocks involved in a battle between a short-selling hedge fund and a Reddit group captured the imagination of the general public, a battle that drove these stocks’ prices higher and squeezed the short seller.
Now, some of that buying excitement has spilled over to crypto where CEX and DEX trading volumes have risen over the past week, according to several crypto trading data sites.
Read More:After GME, Dogecoin and Bitcoin, Chinese Traders Are Betting What Will Pump Next
CEX volumes rise, taking tokens with them
Trading volumes for bitcoin futures on Binance and FTX surged over the weekend, according to data site Skew.
Binance’s BNB token hit a new all-time high at $50.27 during early U.S. trading hours on Monday, while FTX’s FTT token logged a record price of $12.95 on Friday, according to data from Messari.
“ATH [all-time highs] on a few different matrices” [for BNB], Changpeng Zhao, chief executive of Binance, tweeted earlier Monday.
Through a spokesperson, Zhao told CoinDesk that Binance’s utility token’s price rally is driven by its multiple use cases.
“[BNB’s] use cases have expanded to hundreds of applications on numerous platforms and projects within the crypto ecosystem [and] these are reflected in its growing price,” said the spokesperson, quoting Zhao. “…To become a true mass-adopted application, BNB must be able to facilitate billions of transactions per day. In its current form, we still have a long way to go.”
The traffic spike last weekend pushing BNB and FTT to the record highs likely resulted from increased trading traffic by retail traders coming from the traditional stock market, according John Todaro, director of institutional research at TradeBlock. (Cryptocurrency analytics firm TradeBlock is a subsidiary of CoinDesk.)
“The recent retail trading saga has shown that trading platforms, brokerages and even exchanges can shut down aspects of the trade process without much notice,” Todaro said. “This pushed some retail traders into cryptocurrency markets, as we saw with dogecoin, xrp, and stellar lumens catching a bid on the week.”
Read More:Crypto Long & Short: GameStop, Dogecoin and a New Market Paradigm
In an effort to capitalize on the retail trading frenzy caused by the GameStop stock drama, FTX last week listed a WallStreetBets (WSB) index quarterly futures contract, named for the Reddit group involved with the GameStop drama. The basket of stocks in the contract include GameStop plus Nokia (NOK), BlackBerry (BB), AMC Entertainment (AMC) plus the iShares Silver Trust (SLV) because of recent interest in silver.
Read More:FTX Exchange Lists WallStreetBets Futures to Capitalize on Investing Movement
“FTX lists tokenized equities, so investors could also be anticipating that Robinhood users and others may switch over to FTX to continue investing in stocks without the limits that various traditional brokerages have applied on their retail users,” Todaro added.
As of press time, FTX did not respond to CoinDesk’s requests for comment.
UniSwap and SushiSwap lead way for DEXs
Activity in decentralized finance (DeFi) is on the upswing. Total January trading volume on DEXs soared to an all-time high above $50 billion. On a seven-day basis, UniSwap and SushiSwap, the two leading DEXs, took 48.8% and 23.3%, respectively, of all DEX trading volumes, according to Dune Analytics’ DEX metrics tracker.
Read More: Decentralized Exchange Volumes Hit Record Above $50B in January
“Overall, the [crypto] market has had a lot of volume increased, both on CEX and DeFi,” Peter Chan, lead quant trader at Hong Kong-based OneBit Quant, told CoinDesk. He credits growing trade volume on SushiSwap for its SUSHI token’s price surge.
At the same time, Uniswap (UNI) and SushiSwap tokens exceeded their previous high prices, on Jan 31. and Feb. 1, respectively, according to data from Messari’s decentralized finance tracker.
Retail traders appear to be driving at least part of the price movement. The number of Google searches for “Uniswap,” the biggest decentralized exchange by market cap, is almost as high as during last year’s “DeFi summer” boom. That is an indicator of retail demand for DEXs, according to TradeBlock’s weekly newsletter of Feb. 1. It also reflects some retail traders’ growing concerns regarding centralized trading platforms, with more people wanting to learn about decentralized exchanges such as Uniswap.
“Within DeFi, arguably the most ostensible applications in the sector are the DEXs [such as] Uniswap and SushiSwap,” Todaro said. “As the sector heats up, UNI and SUSHI have been the primary benefactors as they are the most visible.”
The amount of Ether held on exchanges has plunged over the past two days, with CryptoQuant data indicating that just 8.1 million ETH is currently sitting in the reserves of centralized exchanges.
The acceleration of ETH being taken off exchanges was highlighted by Nuggets News’ Alex Saunders, who noted a 10% drop in Ether reserves on centralized platforms on Jan.14 — from 11 million to 10 million over 24 hours. “Exchanges will run out of ETH in 10 days at current rate,” he predicted.
Earlier today, Saunders noted the decline in Ether reserves had escalated by a further 20% leading him to suggest that centralized platforms may run out of ETH in the next 48 hours.
Exchanges could be out of $ETH within 48 hours. Demand has sky rocketed. Exchange reserves fell 20% from 10M to 8M in the last few hours. With targets of $5k, $10k & $20k long term, I doubt many HODLers will sell their ETH in the $1-2k range. ️ #ETH2 #DeFi #NFTs #Gaming #DAO pic.twitter.com/rYPOch2u7p
— Alex Saunders (@AlexSaundersAU) January 14, 2021
Other data providers also show that exchange balances have fallen by 42.5% since tagging an all-time high of 14.1 million in mid-May 2020.
Data from Glassnode indicates that Ether reserves on centralized exchanges have not been this low since July 2018. As of this writing, only 7% of Ether’s circulating supply is held on exchanges.
Saunders interprets the data as suggesting an explosive bull-run into new all-time highs is imminent for Ether, stating:
“We all know what happened when demand outstripped supply of $BTC. It quadrupled in 90 days.”
CryptoQuant data shows that exchanges’ BTC reserves have fallen by 21% since posting an all-time high of nearly three million during March 2020. However, the recent acceleration in Ether being taken off exchanges far outpaces that of BTC. Exchanges’ BTC reserves only fell by 4.5% since Oct. 21 while Bitcoin’s price increased 230%, from roughly $12,000 to $40,000.
According to crypto market data aggregator Into The Block, Ether is currently exhibiting numerous bullish signals, including a bid-to-ask volume imbalance of almost 9%.
While many U.S. crypto exchanges are using the latest bull run to spruce themselves up in hopes of impressing institutional investors and regulators, China’s so-called “Big Three” centralized crypto exchanges (CEX) – Binance, Huobi and OKEx – are slinging mud at each other.
The latest flap is over a bogus video that purports to show a single sell order of 21 million bitcoin on Binance on Jan. 4. The clip went viral last week on WeChat, a popular China-based social media platform.
The video, viewed by CoinDesk, claims that bitcoin’s price took a hit after the order was completed. Screenshots in a WeChat group’s chats show that some users appear to be furious, accusing Binance of “market manipulation.”
The angry reactions ignored the fact that the 21 million number alludes to the total amount of bitcoin that will ever be mined, sometime by the year 2140 (bitcoin’s total supply currently stands at 18.6 million). So clearly 21 million bitcoin could not have been sold. Besides, most major exchanges’ bitcoin reserve data are available to trace.
But because we’re nothing if not thorough, CoinDesk confirmed with several on-chain data firms, including CipherTrace and CryptoQuant, that no orders of that size were placed on Binance at the time the video purports to show.
A Binance executive spoke out about the video on WeChat, throwing shade at unnamed “competitors” he claimed were behind the video.
The video “could not be more fake,” Yi He, co-founder and chief marketing officer of Binance, wrote in Chinese on WeChat. “I was not going to respond because I thought nobody was going to believe it, but considering how ‘hard-working’ our competitors were to post it on every group chat, I just wanted to express my appreciation.”
As of press time, Binance did not respond to CoinDesk’s requests for comment.
If you looked at English-language social media platforms, you would think the three China-originated centralized crypto exchanges coexist in peace and harmony. But a survey of Chinese-language platforms reveal a differing dynamic. Screenshots of chats and public posts on WeChat and other popular Chinese social media platforms such as Weibo show multiple disputes among the three exchanges over the past several years. This is not the first time Binance’s He has confronted executives from rivals OKEx and Huobi on social media.
He’s accusations notwithstanding, both Huobi and OKEx denied responsibility for the latest incident. Ciara Sun, vice president of global business at Huobi Group, denied Huobi was involved in “the creation of the video,” and told CoinDesk the video “falsely” recorded a sell order on Binance’s platform.
“As a global financial organization that adheres to both ethical and regulatory standards, we value honesty and transparency within our organization and do not rely on misleading marketing tactics that would erode the trust of our community,” Sun said.
Likewise, OKEx CEO Jay Hao told CoinDesk that crypto exchanges are often the victims of false accusations of “price manipulation.”
“Anyone with knowledge of this industry would immediately be able to dismiss a photo like this, but it’s unfortunate that some investors still suffer from these types of groundless and fictitious accusations,” Hao said.
It’s not just business, it’s personal
Normal business competition, centered on capturing market share in China, is only one part of the tensions involving the three exchanges. These hard feelings go back at least four years, when OKCoin’s then-CTO, Changpeng Zhao, and co-founder Yi He left what was at the time the largest Chinese crypto-to-fiat exchange to start Binance, according to Colin Wu, a China-based crypto writer who previously worked in the country’s crypto mining industry.
Meanwhile, OKCoin, along with other China-based bitcoin trading platforms, closed their trading operations in the country and moved offshore after Chinese regulators banned initial coin offerings in late 2017. OKEx has worked as a separate entity from its parent company OK Group or OKCoin since 2017, a spokesperson told CoinDesk previously. OKCoin now is a San Francisco-based crypto exchange, led by Chief Executive Hong Fang.
Huobi joined the fray slightly later and friction among the three exchanges really intensified after each launched crypto derivatives products. OKEx currently is the second-biggest derivatives exchange by bitcoin open interest, followed by Binance and Huobi. (The CME is the largest thanks to growing interest from institutional investors in the U.S.)
Several sources, who agreed to speak on the subject anonymously due to close business relationships with the three exchanges, told CoinDesk that as the competition heats up again there may be an uptick in tricks and false information such as the fake Binance video. In turn it can cause a lot of “fear, uncertainty and doubt” (FUD) among retail traders and investors in China, especially those who are relatively new to the market.
“The video came out at a time when retail sentiment was at the peak,” one source said. “When people are scared of the top, they could be easily aroused by anything like this.”
“No matter how much the cryptocurrency space has matured, there will always be interested parties from without who leap at the chance to cause FUD amongst traders,” OKEx’s Hao said.