Why has the exchange's BTC balance not recovered? We have summarized these two reasons

Editor’s Note: The original title was “Data shows: Due to long-term holding and distrust of exchanges, the BTC balance on exchanges has not yet recovered”

Between April 22 and April 29, Bitcoin’s price fundamentals recorded their largest gains since March 13. Bitcoin’s price increased by 23.63% and its market capitalization increased by 17.50%.

Source: Pixabay

In fact, Bitcoin’s on-chain fundamentals also performed positively, with transaction volume increasing by 32.47% and the number of active addresses increasing by 6.60%.

However, according to Arcane Research’s latest weekly update, Bitcoin balances held on exchanges are far from improving.

According to the attached chart, Bitcoin exchange addresses have lost more than 10% of the total BTC accumulated since the March crash, and this number has not improved on the chart. Arcane Research went on to highlight several possibilities that led to the current situation, including the increase in the number of fraudsters and the lack of trust in well-known exchanges. In this article, we will try to analyze these two hypotheses.

Bitcoin accumulation increases

It is speculated that after the collapse of traditional markets in March, many people were cashing out their Bitcoin to hold liquidity during the spread of COVID-19. With the improvement of market sentiment in the past few weeks, traders and investors have undoubtedly returned to the cryptocurrency space, but they are now more inclined to hold their BTC assets rather than trade them.

Source: Charts.woobull.com

The attached chart shows the change in holdings by BTC address for 1 day (blue line), 1 week (pink line) and 1 month. This change shows the fact that the number of holding addresses has increased over the past month.

Distrust of exchanges and recent attacks

Although the distrust of exchanges is a speculative interpretation, this view is significant. It started with the so-called intentional DDOS attack on BitMEX, which prevented users from trading on BitMEX during the "3.12 avalanche". Many people blamed BitMEX for the decline of Bitcoin and believed that the market crash was partly caused or exacerbated by the exchange handling all the liquidated positions.

Additionally, the fact that prices appeared to have recovered after the BitMEX outage has fueled investor distrust of the exchange.

In addition, the frequent attacks on cryptocurrency projects have caused the reliability of digital asset processors to be questioned.

Binance, one of the world’s largest cryptocurrency exchanges, suffered a DDOS attack a few days ago. Although no funds were lost, it also showed that these exchanges and third-party institutions have become targets of attacks.

The DeFi project dForce protocol had previously had $25 million stolen by hackers. Although the cryptocurrencies were eventually returned, this did not improve the reliability of the project.

While it cannot be entirely assumed that the above assumptions are the main reason for the decline in Bitcoin balances on exchanges, these events (distrust of exchanges and hacks) certainly played a role.

Link to this article: https://www.8btc.com/article/591788
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