Topic: A couple of interesting charts about Exchanges (Read 887 times)

Update: balance on exchanges is drying at a record pace
This, coupled with the institutional buying frenzy is causing a bitcoin shortage.

A very nice find by @El duderino_:


Ok, Grayscale is not buying thousands of BTC on a daily basis on exchanges (well, Microstrategy uses exchanges), but the message is pretty clear in my opinion. WHat happens when the books are empty?

I'm totally okay with speculation

In fact, I'm okay with active hoarding too. Active means you make a living out of it -- sell the bull, buy the bear, and live the spread, then rinse, repeat. If the price goes up without major pullbacks, as is the case now, all the better for your stash. But what's in it for the top dogs? I'm not sure if the narrative of "a new gold" explains it, and I don't buy it. Basically, it's free money for us, mostly holders and sometimes spenders, at their expense. So where's the catch? Why are they doing this to us? What are they really trying to achieve by buying Bitcoin?

Speculation and as a store of value/investment kept in private wallets.  I agree, very little bitcoin is actually used to buy things.

What's up with that giant spike in what looks like Nov. 2019?  That looks as though a whale sold a whole bunch of bitcoin (or at least deposited it on an exchange).  It looks like it corresponds pretty well with a minor price drop, but for the life of me I can't remember any particular events happening around that time period with bitcoin.

Coinbase is a US company, so they probably have no choice but to cooperate with the feds.  Fuckin' land of the free, home of the brave my ass.  It's one giant surveillance state sandwiched by two great bodies of water and a superior country to the north.

And it doesn't bode well

Okay, there's no more weak hands left on the market, but what's the point? I mean hoarding Bitcoin for the sake of hoarding it is pretty meaningless. If we consider Bitcoin a store of value, it should, well, store value and that means liquidity, i.e. being able to liquidate your position without crashing the price. But as prices go up, they become more and more fragile, and it turns into a game of musical chairs, with chairs constantly being removed, until "institutional money" thinks enough is enough and dumps their coins on our heads (triggering an avalanche of liquidations)

You are correct, of course, and I am sorry if I couldn’t make my point more clear with my broken English.
Price going up because of an imbalance in the bid/offer is surely a tautology.
What I meant to signal is that this imbalance seems to be structural now, when compared to 2017.
Now the buying pressure is not coming from a psychological effect due to the FOMO of traders/punters/scalpers, that led to a spectacular, yet very temporary bubble in the price back in 2017.
This time the price is rising because institutional money is coming, with a different time horizon, not hours/days, but months/years. On the offer side supply has been limited not only by the halving, kicking in Stock to Flow dynamics, but from a lack of “weak hands” willing to offer their coins on exchanges.

Another way of looking at this is trough the HodlWaves graph:



Coins not moved since 24 months are definitely on the rise!

Yes, it could be good if we can have that way for we have the same thing that we like. But not all shoe fits to all size of foot so meaning bitcoiners should have the option base on what he like about exchanges and digital wallets. We should let everyone has their own ways and we should not force them to be in a place or scenario where they don't like. Actually I am not against centralized exchange and I am even using a non custodial wallet but I know the limit and should definitely not trust this kind of platform.

I hope that popularity of DEXes will be higher in the future. People should use non-custody wallets like wasabi or ownr and non-custody exchanges

Isn't there a subtly disguised tautology here?

In a nutshell, price rising is the inevitable outcome of increasing demand and fewer bitcoins available to buy. Since otherwise the price simply wouldn't rise. In other words and in a more general sense, this is always the case with anything rising in price, i.e. demand exceeding supply


I think that can be explained by simple stashing rather than staking. What we see here can be adequately described by the deflation spiral dynamic and hoarding behavior of consumers (in this case, Bitcoin holders)

The quota of Bitcoin held at exchanges has been constantly following.
This means that “fast money”accounts have limited ammos.
This is something new in the Bitcoin ecosystem, as pointed out in this research.

Why Bitcoin is Surging and How This Rally Is Different from 2017 (Hint: It’s Who’s Buying)




So it’s not retail FOMO driving the market up as in 2017, but it’s institutional adoption eroding a limited offer as a proper “Phase5” Bitcoin Treasuritisation.

One other explication for this limited offer on exchanges, if I may add to something not explicitedly stated in the piece is the DeFi craze, that might have contributed to this drain from exchange balances into staking platforms.   

I do hope so.
I hope users concerned about their privacy are willing to punish the bad actors against bitcoin, like Coinbase.
This is why I opened this thread to make #deletecoinbase great again.

Maybe there are more reasons besides the outages (that now are being accused as being purposeful)?

There are also accusations that Coinbase is helping out the feds with surveillance tools.  No?

Coindesk article from 5 days ago describing Coinbase as helping out the feds

The drainage of funds from the exchanges continue.
Particularly from coinbase.

(I like it, remember to make #deletecoinbase great again).



Users Punish Coinbase for Outage by Withdrawing Record Amount of BTC



According to Glassnode BTC deposited in Exchanges are at one year low:



Glassnode had already analysed this outflow coming to some interesting conclusions:

Bitcoin Investors' Exodus from Major Exchanges Continues

In their analysis, the outlfow of capital is given to a certain mix of the following reasons:

• Cold Storage for Hodling
• Lack of Trust
• Ongoing Trends

Sure, the bitfinex situation was smaller than gox in terms of the number of coins...  And, of course, the Gox coins were coming off of the peak of the 2013 price rise, while the bitfinex hack came after a very long bear market that was only just beginning to get rolling and ramping up.

Seems that in 2016 Bitfinex was gaining a lot of prominence in the bitcoin space, and Chinese exchanges were largely losing credibility and getting shut down around that time, but bitfinex was retaining some credibility because it was targeting USD trades, so it's difficult to suggest that the 2016 bitfinex hack was not important at the time that it happened, even though afterwards there seems to have been a decent recovery from whatever had then happened and the way that bitfinex resolved the matter had been contrasted to the Gox drama that both removed a lot of coins from the market as you stated and not resolving, including having the Gox trustee engaging in questionable selling of coins.. a hack/scam that continues to give.

I never believed that hack was anything important, sure bitfinex is a big one but there have been tons of hacks that didn't really destroyed crypto community which that won't didn't neither. I was here when mt.gox happened, it really hurt everyone because all the early birds lost their money, many people who consider today like "I wish I got in when it was 3 cents, I could have gotten out at 20k and be millionaire!!" are actually wrong because many friends I had lost all their money at mt.gox and price was around 100 bucks and more during that period when it was %100 certain that they are gone.

Or I remember cryptsy which was basically the biggest altcoin exchange, what binance is today, and it went away yet all the altcoins of that time are still in top 10.

It does not matter what I was thinking beyond what I have already explained (or attempted to explain).

I responded to your initial post, and I thought that my response was self-explanatory as a way to provide information or to supplement information that had already been provided by you and fillippone in earlier posts.

Thereafter, you questioned my response to your post, so again, I explained why I had responded.  

Seems pretty clear to me.. at least clear enough.



Yes.  Bitfinex issued their BFX token that caused a 36% socialized loss (represented by the BFX token) several weeks after their early August "hackening", and after they issued the token then each month (at around the end of the month or beginning of the next month), they redeemed a certain portion of those tokens.. I don't recall when the first redemption was but let's just say they redeemed BFX tokens on October 1, November 1, December 1, January 1, February 1, March 1, and then the final redemption of BFX tokens was on April 1.



Yes.  They did make redemptions earlier.. but I cannot remember all of the dates, exactly.. There were several redemption dates.  I was just saying in my earlier post(s), that they had redeemed all of the BFX tokens by early April 2017.  Here is a Bitfinex announcement of that April 2017 redemption.



I recall that the doom and gloom lasted several months.  Initially there was doom and gloom assertions that bitfinex was never coming back, and then when they came back (contrary to the doom and gloom predictions) there was a decent amount of uncertainty about whether the come back was real and whether account holders would get their money back or if bitfinex's coming back would last beyond mere symbolism (exchange exiting shenanigans)... so yeah, overall the doom and gloom lasted several months, and probably even into the next year and there was even questions about the matter of how the social loss was borne and whether bitfinex had authority to treat the hackenings as a social loss but still surprise when they redeemed all of the BFX tokens so quickly (8 months or so).

We are not really saying anything different from one another, but I am saying that there had continued to be a lingering questioning of Bitfinex through out all of that period that even lasted beyond that period and its motives and Tether for a long time, and surely bitfinex has recovered a decent amount of its reputation through the years, and many folks even thought that bitfinex had been quite  innovative in the way that it had structured recovery (in a kind of unprecedented way) and recovered from a purported pretty large scale hack (including questions about whether bitfinex and other exchanges were even profitable beyond just stealing coins from others), yet I am not saying that everyone agrees about how to assess bitfinex matters, its reputation or scruples or that everything went back to hunky dory at some point, which seems to be the all over the place picture that you are ambiguously (at best) painting.

That's not the case

In fact, I'm now curious what in my post made you think so at all. They paid back even before April. As far as I remember, they redeemed the remaining tokens as early as February (if not January). Though I agree about the doom and gloom that had beset the whole crypto arena right after the hack. But it didn't last for long anyway as prices started to climb back in the fall of that year and by the end of 2016 already were over 1k, i.e. reached and then surpassed the 2013 highs

You seemed to have been speculating that bitfinex was ONLY recently recovering from their 2016 "hack," and I just wanted to provide some details that suggests that their recovery may have been quite quick from the 2016 "hackening" situation.

Sure, I don't have too many ideas regarding the extent to which bitfinex's finances and even their recovery from the 2016 hack may have been smoke and mirrors, but I do recall the level of doom and gloom in the bitcoin space in August through about October 2016 was largely attributable to the bitfinex hack. 

I recall the surprise in the bitcoin space regarding the quickness in which they paid back those BFX tokens, when all the BFX tokens were reclaimed as of April 1, 2017.. Yep.. surprise surprise, and likely bitfinex worked that situation to their advantage in order to profit from the hack... but whatever... those are the kinds of things that happen in the wild, wild west.. 

I also recall that there has been a whole hell of a lot of FUD spreading in the bitcoin space in connection with bitfinex's ongoing connection and practices regarding tether... and that FUD spreading regarding tether has had stronger periods, but it has been largely ongoing since the inception of tether, and the issuance of tether coins which I think was around late 2014.

Probably part of my point is that frequently the bitfinex situation seems to be overstated from my perspective, even though I don't really proclaim to have any information that differs greatly from anyone else, but when it appears to me that important facts are neither being disclosed, being downplayed or they seem to be twisted in directions that come off as illogical or unreasonable, then I might become motivated to clarify my perspective, which is what I was attempting to do in my earlier post.

Regarding speculation, sure, speculate about whatever you want, and hopefully you are able to adapt your speculation to facts and logic, too, if you are able to find out about more accurate facts or more reasonable logic, then it is good to adapt... pie in the sky speculation or speculating based on wishful facts, can come off as a bit annoying, especially if other more plausible facts and explanations are apparent. 

I understand that frequently folks are going to differ regarding what facts are relevant and material and also regarding what kinds of inferences are reasonably drawn from such facts.  So there is that.

By the way, I largely accept the theory that fillippone presented in his earlier post about bitfinex likely being involved in some of the current behind the scenes shenanigans, even though of course, there is quite a bit of speculation in that, too, and in my earlier post, I was largely just attempting to clarify the inferences and connections that you, deisik, seemed to have been drawing from the 2016 purported "hackening."

It was called the BFX token

I was not trading there at the time as I had moved my coins from the exchange in 2015 (long before the hack), but I'm more or less aware of the course of events. However, it doesn't tell us anything about what's going on now, i.e. why Bitfinex would be selling their coins (whatever their source might be) provided it is them selling. Of course, it can be anything but no one can stop us from speculating, right?

Not only China, many large countries have their own manipulation organizations. such as in the US, Japan and Russia. they have very powerful manipulations but it only happens most strongly in China and the United States. In this decentralized market and without this law, no one can prevent us from increasing our profits. If I were a big money man, I would manipulate this market!

I give up with trading chart because I can't analyze when chart make some coin up or down, always buy coin when touch support price and take chance by checking few day with some coin project, other time always checking with internal news and update information about coin want to trade.

If you recall, the bitfinex proclaimed that the users were going to absorb the hack, which was both socializing the losses in the form of a loan that caused bitfinex to convert the value of all of the users holdings to a dollar value, and thereafter shaving 36% off of the value of each of the user accounts while issuing a loan coin that it paid back all of it by April 1, 2017, which would have been 8 months from the time of the hack.

Furthermore, the issued coin traded at just a fraction of its issuance value, which likely caused bitfinex the ability to buy back those issued coins for pennies on the dollar, and also, the increase in the BTC price and also other coins likely caused additional abilities of Bitfinex to recoup losses of those coins... by the way I believe that it was around 120k BTC... but whatever, in that ballpark of coins.

Looks like a pretty solid assumption

They had been hacked a couple months short of 4 years ago with 130k bitcoins stolen, and somehow they didn't kick the bucket. By now they may have gotten back (a certain amount of) these bitcoins. However, the next question in line would be if Bitfinex has or had so much of Bitcoin, why were they not selling their stash before? What made them start selling now? Something must be going on down there which we don't have a foggiest clue about

I am going down this lonely speculation.
Trying always to teach me something trough reflection and exchange with other users.

According to this tweet by Paolo Ardoino, Bitfinex CTO, the drop in BItcoin held by Biftinex was caused by an outflow following a (series of) large OTC trade(s):

https://twitter.com/paoloardoino/status/1250845831353323527

In this case an OTC trade only means that the order was "pre-arranged" between two whales (let's imagine, just to simplify the reasoning, an early bitcoin investor on the sell side and a crypto-hedge fund on buy side).
Bitfinex was used as a "venue" to have the exchange, I guess this greatly simplifies the tax and legal obligations between the parties.

If the buyer decided to remove the bitcoins from the exchange (wise decision for countless reasons), it means that the seller had deposited them first (this decision is more worrying).
So one whale can certainly be blamed for the decrease in liquidity, but certainly another whale had previously deposited this liquidity with the exchange.
Whales give, whales take away.
What is worring is that we have to go back roughly 6 months to see a surge in Bitcoin held at that exchange before the market crash.

Here we have a snapshot of the Balance of bitcoins held at bitfinex in the last 6 months.



So,
what is an explaination?

Well, as pointed out by @Plutosky on the italian board, one possible explaination is that Bitfinex IS one of the whales: the bitcoin were owned by bitfinex which gained them trough trading and/or fees, and sold to an hedge fund.  Fascinating idea.

I take back to life this old thread to update a couple of reflections, spurred after a post on the WO thread.

The mid-March crash saw the share of coins held by the exchanges drop significantly, returning to levels seen only last year.




The outflow was pretty noticeable.

A few days ago Jameson Lopp posted a breakdown of the data on the various exchanges on Twitter, and we see that the data confirms, with some differences, the general trend.




https://twitter.com/lopp/status/1260189246511513601?s=21


In my opinion, the interpretation we can derive from it is that the market crash scared traders, not holders.
Those who had the funds on the exchanges (traders) lost them in favor of the hodlers, who withdrew them from the exchanges to have control of the keys (since they know that "not your keys, not your bitcoin").


We can try to find confirmation of this trend from the HODL WAVE chart:



The HODL WAVE concept was first invented by unchained capital


We see in fact that the coins that have been moved following the crash are mainly those with an age up to 3 months, in particular those up to 1 week. I say this because the bottom line of the range 3-6 months is pretty straight, and there is no noticeable bump at the market crash.

Recall that the coins used for trading, when they are inside the exchanges, do not generate on-chain transactions, the on chain transaction occurs only when they are moved to and out of the exchanges.
Therefore, since the outflow to the exchanges has increased, and being the three-month line practically horizontal, we can deduce that the share of the outflow (increasing percentage of coins moved by a week or less) is compensated by that of the coins moved in the last 1-3 months (the portion of the graph immediately below the yellow line that in fact has "reduced").
That means the money was movet to the exchange 1m-3m ago, and moved out of those at the market crash.
So we can guess that those coins were traders willing to play some volatility before the halving, and being beaten hard by king Bitcoin.

Guilty. I keep them in there waiting for a spike to convert them to fiat. I understand the key mantra, I just don't have much that I'm willing to take the risk if that could mean doubling what I have.

 Unfortunately there is no way to stop these kind of hoarding because exchanges basically run it all by themselves with all the trading going on. I mean we are talking about "exchanges" as in a lot of companies, not just one so its fine but at the same time they do have a monopoly on bitcoin and almost all other coins as well. Without an exchange it would be close to impossible to trade coins, believe me I was here when people actually traded their new coins to btc manually and there was tons of scamming involved as well. So exchanges both deserve that kind of hoarding of wealth because they are doing something to help us, but at the same time its a very scary thing as well.

This si my first point of concern.
I think medium bitcoiner should be smarter than average, but this is so dumb!

PS: No merit to send you @1referee and @coin-investor, I am dry again.

This is a cause of concern, about what has been written a thousand times and what other thousands of traders have experienced in the past, people are still storing their coins in the exchange, are newbies coming in not educated enough or are they still did not understand that you do not own coins if you did not have its keys, if this chart is consistent, we will still see a lot of traders complaining and feel sorry for string their coins in exchange if hacking occurs.

dat Chinese scam dump tho

It's not that old school. I see more and more people actually wanting to participate by running a full node. Most people obviously aren't here for the fundamentals and thus don't want any of that hassle, but the few who do actually want to run their own node are the ones that add more value to the network than all of those combined who don't run a node.

In the end, you don't want people with no idea of a full node the run one or mess around with a Lightning node. They have no clue what software to run or how to verify the signatures of the software they plan to install. Most people are so stupid that they probably Google 'Bitcoin full node' and then click on the first site they see to install their crappy/scammy software.

Also, downloading the blockchain isn't that big of a deal. The main time consuming part is validating the data.

Yes, this is exactly what I meant. Btw, you don’t need a full node (I wouldn’t recommend for new user) or an online wallet (I wouldn’t recommend for anyone), but you can safely rely on any SPV wallet (electrum, green or BRD just to mention a few).

Isn't that down to the Coinbase factor? Lots of the new money flowing into bitcoin in late 2017 and early 2018 was retail investors who bought on Coinbase and left their coins there, using it as a wallet.

The old school idea of having your own wallet on your PC is a pre-2017 fashion. The blockchain is so big, people don't want to spend several weeks downloading it, and are using online wallets and exchanges to store their coins.

This chart is as misleading as it can be

Taking year 2010 as a reference point (what this chart essentially does) is a very naive approach unless it was done on purpose, of course. If anything, you should only consider the period when Bitcoin became mainstream, and that was not earlier than 2015. But if you take that year as a reference point, you will easily see that Bitcoin has recently been as volatile as ever (since it went mainstream)

In fact, we don't even need to bother checking the charts as only a week ago Bitcoin plunged below 7k, and just a few days later it is already worth more than $8400, which, for a moment, is a 15% increase within less than a week. Not something that you could plausibly label or term as volatility going away

Well, evicende contrast with this statement:  during 2019 yes price has been going up, but volaitlity has been doing down:



https://charts.woobull.com/bitcoin-volatility/

I can concede volatility has been moving sidways for the second part of the year, but price and amount of coins has been steadily increasing.
So probably this has to do with price level, and not price volatility, to say th least.

These charts essentially tell us what we already know

That Bitcoin (not speaking of other cryptocurrencies) is primarily used for speculation (with Dogecoin for gambling as an exception to the rule). And that answers your question why the amount held in exchange accounts surges during the times of volatility (i.e. not necessarily in the pump phase alone). Consequently, in less volatile times it makes no sense to keep coins on exchanges, so people reasonably withdraw bitcoins from their accounts

A very interesting metric is available on glassnode (you have to register, for free, to be able to see it): Bitcoin: Exchange Balance.






In my opinion, this chart  could be done a little better, but basically it tells us that more than two million Bitcoins (left axis), or more than 10% of all available bitcoins, are held at exchanges.

Not only did this figure increase exponentially with the pump of December 2017, but then it continued to increase, increasing again in May of this year. That means that people has been consistently putting and keeping their coins in the exchanges; not only during the pumps, when many inexperienced traders first joined crypto markets, but also during each subsequent market phase.

It could also be a symptom of the increased trading activity, but I cannot see any reasons why trading activity should be systematically increased (also given the lower and lower volatility of the BTC markets), I think it is more related to "inexperienced users" still not familiar with the "not your keys, not your bitcoins" mantra.

Actually, if the share of BTC held at the exchanges increases when the BTC is in the pump phase, it can mean two things: first hypothesis who has the BTC deposits them at the exchange to sell them, or who approaches for the first time he buys BTC and leaves them on the exchange, unaware of the risks this entails.
I am inclined for this second hypothesis because we can see from this graph that the share increases constantly, consistently  with the idea that more people are approaching cryptocurrencies for the first time.


The second graph is the following one:



This graph tells us that the main quota of liquidity is during European Times, plus the start of the US, with pretty drained liquidity during Asian trading hours.

I have two considerations about this:

• Firstly, I would have expected to see more liquidity during Asian times. China, Korea (South Korea) and Japan still represent very big markets for cyptos, hence I thought there would have been more liquidity during their lively hours. Following the sun, the peak is in Europe, also this come as a surprise, as I thought the US would have played a major role, not only for the retail investors and because of larger user adoptions, but also because of the more investor friendly environments, with exchanges trading spot and derivatives products.
• Secondly I would have expected that, as many traditional markets are subject to automated high frequency trading bots, the difference between the time zones and working/not working days would have been somewhat limited. This might be intresting to see in the future. This might be the typical effect more accurately captured examining the trend of liquidity across the time zones rather than a single snapshot.

What do you think?