Bitcoin Withdrawals Are Above Deposits Since FTX Crash
On-chain data shows that Bitcoin transactions exiting exchanges were greater than the number of them since the FTX collapse.
Bitcoin exchange withdrawals have been above deposits recently
As pointed out by an analyst at the twitter, Deposits on BTC exchanges have fallen in recent months. There are some relevant pointers here; the first is “exchange withdrawals”, which measure the total number of transfers leaving centralized exchange wallets.
The second metric is “exchange deposits”, which, as is already obvious from the name, simply tells us about the number of the opposite type of transactions that are taking place in the market.
Exchange transactions can provide a tip on investor behavior in the market, as holders often use these platforms for selling and buying purposes. Deposits are usually made for distribution while withdrawals can be made for hoarding related purposes.
When these exchange transaction metrics are at high values, it means that investors are likely to be actively trading the cryptocurrency right now.
Another indicator is the “transaction count”, which measures the total amount of Bitcoin transfers taking place anywhere on the network. This metric naturally provides information on whether the blockchain is being heavily used by users or not right now.
Now, here’s a graph that shows the trend of these Bitcoin indicators over the entire history of the cryptocurrency:
The trends in the transaction count, exchange withdrawals and exchange deposits | Source: Jimmy V. Straten on Twitter
As shown in the chart above, Bitcoin exchange escrow transactions have been in a downtrend since the start of the bear market. This is not uncommon and was also witnessed during the last bear market (2018-2019).
The reason this trend can be observed is that the appetite to trade and especially to sell decreases as a bear market runs its course and leaves traders exhausted.
In recent months, however, a special trend has appeared in the Bitcoin market that has never been seen in cryptocurrency history before. It’s the fact that FX withdrawals have now surpassed deposits.
In the past, withdrawals have always lagged behind deposits. A contributing factor behind this may have been that miners produce fresh Bitcoin off exchanges and then make deposits to sell it, throwing transactions out of balance.
Since the fall of FTX in November 2022, however, this structure appears to have changed. The collapse of a platform like FTX has renewed investors’ fear of keeping their coins in centralized custody. Thus, a large number of holders made the decision to withdraw their funds to keep them in self-custodial wallets, thus causing withdrawal transactions to see an unnatural increase.
Bitcoin withdrawals have remained larger than deposits these first few months of 2023, but the gap has been narrowing recently. It now remains to be seen whether the market structure returns to the way it was before or whether this is the new norm.
BTC price
At the time of writing, Bitcoin is trading around $22,000, down 7% over the last week.
Looks like BTC has consolidated sideways recently | Source: BTCUSD on TradingView
Featured Image of Kanchanara from Unsplash.com, Charts from TradingView.com, Glassnode.com