Bitcoin withdrawals exceed deposits since FTX crash
On-chain data shows that Bitcoin transactions exiting exchanges have outnumbered those entering since the FTX collapse.
Bitcoin Exchange withdrawals have been exceeding deposits lately
As pointed out by an analyst on Twitter, BTC exchange deposits have been on the decline for the past few months. There are a few relevant indicators here; the first is “exchange withdrawals”, which measures the total number of transfers exiting centralized exchange wallets.
The second metric is the “exchange deposits”, which, as the name already suggests, simply tells us about the number of the opposite type of transactions taking place in the market.
Exchange transactions can give a hint about investor behavior in the market, as holders usually use these platforms for selling and buying purposes. Deposits are usually made for distribution, while withdrawals may be made for accumulation-related purposes.
When these exchange transaction values have high values, it means that the investors are probably actively trading the cryptocurrency right now.
Another indicator is the “transaction count”, which measures the total number of Bitcoin transfers taking place anywhere on the network. This metric naturally provides insight into whether or not the blockchain is being widely used by users at the moment.
Now, here is a chart showing 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 graph above, deposit transactions for the Bitcoin exchange have been on a downward trend since the beginning of the bear market. This is not unusual and was also seen during the last bear market (2018-2019).
The reason this trend can be observed is that the appetite for trading and especially selling decreases as a bear market runs its course, leaving traders exhausted.
However, over the past few months, a particular trend has emerged in the Bitcoin market that has never been seen in the history of cryptocurrency before. It is the fact that the exchange withdrawals have surpassed the deposits now.
In the past, withdrawals always used to stay below deposits. A contributing factor behind this may have been that miners produce fresh Bitcoin outside of exchanges and then make deposits to sell it, thus unbalancing the transactions.
However, since the FTX crash back in November 2022, this structure appears to have reversed. The collapse of a platform like FTX renewed the fear among investors to keep the coins in centralized custody. So a large number of holders took the decision to withdraw their funds to keep them in self-deposit wallets, which led to the withdrawal transactions observing an unnatural increase.
Bitcoin withdrawals have remained higher than deposits in these first months of 2023, but the gap has closed recently. Now it remains to be seen whether the market structure will return to how 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% in the last week.
Looks like BTC has consolidated sideways recently | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, Charts from TradingView.com, Glassnode.com
