Bitcoin inflows to the largest cryptocurrency exchange have broken a four-year record. What does that tell you?
Following the recent collapse of FTX, the situation in financial flows between exchanges has changed significantly. Firstly, analysts have noted a large volume of bitcoins being transferred to the largest trading platform, Binance, with this figure setting a record since 2018. Secondly, on a larger scale, investors are trying to actively withdraw crypto from other crypto exchanges, as the Sam Bankman-Friede trading platform incident has significantly damaged the reputation of almost all major market players. We tell you more about what’s going on.
Note that trading activity for cryptocurrency holders on exchanges has declined in the meantime. In particular, here is a chart of trading volumes with Bitcoin (blue) and Etherium (green) over the past month. As you can see in the illustration, there has been a noticeable decline in recent days.
Graph of trading volumes with Bitcoin (blue) and Etherium (green) on cryptocurrency exchanges
Where is the best place to store bitcoins?
According to analytics platform CryptoQuant, over 138 thousand BTC were transferred to Binance on November 18 alone. In the chart below, this figure is marked in green.
Coin inflows to Binance
This is a record for inflows to the exchange since November 30, 2018. As a reminder, just two weeks after that date, Bitcoin's price hit its bottom in the previous bear cycle, dropping to the $3,100 line. Binance itself has crypto reserves now even higher than before the FTX collapse. This figure exceeds the 573 thousand BTC mark.
Binance reserves
According to Cointelegraph’s sources, at least 59 thousand BTC out of the above inflow to Binance came from the loss of Bitcoin BEP2 (BTCB) coin’s peg to Bitcoin price.
As a reminder, BTCB is a bitcoin-backed token in the Binance Chain blockchain with a publicly known reserve address. At the time of writing, this wallet held 68,200 BTC, with 127,351 BTC withdrawn from it during the day.
BTCB reserve transactions
However, unlike normal transactions, the decrease in BTCB capitalization at the same time as the decrease in reserve indicates that an active sale of the major cryptocurrency is taking place. The theory behind this assumption was explained on his Twitter account by the CEO of analytics platform CryptoQuant Ki Ën-ju. Here’s his rejoinder.
Imagine you’re Binance chief executive Changpen Zhao. Why would you want to decouple the value of BTCB from Bitcoin? Your purpose is to support projects on the Binance blockchain. The lack of public announcements from Binance means it is client or investor money. So I think this activity most likely came from a client or clients who are trying to sell a large volume of coins in a hurry.
The well-known journalist Colin Wu, on the other hand, has a different opinion. According to him, large movements of coins between exchanges, and Binance in particular, are related to the usual reorganisation of reserves and will not lead to significant changes in the market. There may be some truth here too. Zhao did announce the release of trading platform reserves earlier to reassure customers amid the FTX collapse. There was more than enough money there, which means that even in the event of massive withdrawals from the trading platforms, Binance will surely be able to cope with the situation.
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What’s happening on other crypto exchanges is different: here, analysts at JPMorgan have noted a noticeable outflow of funds. Of the trading platforms mentioned in their investor call, Gemini, OKX and Crypto.com set records for outflows, according to Decrypt. In addition, experts noted a significant decline in the capitalisation of popular stackablecoins, which could lead to another wave of Bitcoin declines in the future.
Coin inflows/outflows from all exchanges
JPMorgan officials also don’t rule out a continued shock to the market from the FTX news in the next few weeks. Here’s a quote from their address on the matter.
Last week we wrote that similar to what happened after the TerraUSD crash last May, the current phase of deleveraging, which began with the collapse of Alameda Research and FTX, is likely to continue for at least another few weeks, causing a cascade of margin calls and crashes of cryptocurrency companies and platforms.
“Deleveraging” in this context is when investors or companies reduce the debt they previously incurred to make investments in the cryptosphere. Most analysts agree that only after “deleveraging” debt will the crypto market hit rock bottom and potentially recover.
We believe that such activity by cryptocurrency holders is quite logical, as the FTX situation caused investors to panic. However, thanks to this event, the digital asset market has somehow come closer to the end of the bear market than it has moved further away from it. And such collapses in any case help the niche to "zero in" and move towards relative stability.
What do you think about this? Share your opinion in our millionaires cryptochat. We’ll discuss other important developments from the world of blockchain and decentralisation there too.
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