Looking at Bitcoin flows, the blockchain intelligence firm sees the biggest change as moving funds from one centralized exchange to another.
Looking at Bitcoin flows, the blockchain intelligence firm sees the biggest change as moving funds from one centralized exchange to another, while DEX growth can be attributed to a trading spike as volatility grows.
For the past couple of days, there has been a lot of hand wringing about the spike in cryptocurrency outflows from centralized exchanges.
Indeed, CoinDesk noted on Nov. 17 that 220,000 Bitcoins had been pulled over the past since Nov. 7, citing Coinglass figures.
But the numbers are beginning to moderate, with the total outflow now under 50,000 over the last 30 days. And even a cursory glance shows that a large chunk of it has ended up on Binance, which has seen its Bitcoin balance rise more than 60,000 in that time — and more than 94,000 over the past 24 hours.
Meanwhile, Coinbase Pro is down 71,000 in the past month, Gemini is down 26,000 and Kraken down 20,000. However, Bitfinex is up almost 45,000 and Huobi up 15,000.
Which is one of the reasons why in a Nov. 16 Twitter thread, blockchain intelligence firm Chainalysis suggested that the outflows may not be as big a problem as they appeared.
“Overall, while other firms may face insolvency, many market fundamentals remain stable as reporting suggests the FTX situation stems from financial fraud rather than a blockchain or crypto-specific failure,” it said.
While acknowledging that there has been a huge outflow of Bitcoins from centralized exchanges, Chainalysis said:
“Where are those funds going when they leave centralized exchanges? Mostly to other centralized exchanges. But we’ve also seen spikes in funds sent to personal wallets for safekeeping (of course, they can always move again), and to DeFi protocols.”
Indeed, the rush of crypto-to-USD trades has also “died down [and] users now appear to be cashing out of crypto at roughly the same rates they were before the FTX crisis.”
DEX Data Misleading
Beyond that, the numbers don’t really support a major rush to DeFi or cold wallet narrative.
For one thing, the CeFi-to-DeFi shift is a bit misleading, as 90% of decentralized exchanges’ (DEXs) inflows can be attributed to smart contracts — and a very large percent from one account, a bot of sketchy origins.
“Overall, the data suggests that the DEX trading spike isn’t primarily driven by inflows from CEX users looking to self-custody,” Chainalysis said. “Rather, it’s driven by existing DeFi users trading on the volatility in the market, and one industrious MEV bot attempting to front-run them.”
