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Bitcoin balances continue to decline on exchanges; Trust coming into play?

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Between 22 April and 29 April, Bitcoin’s price fundamentals recorded their most significant growth since 13 March. Bitcoin’s price went up by 23.63 percent, with its market cap surging by 17.50 percent.

In fact, its on-chain fundamentals also registered a lively period with a 32.47 percent growth in transaction volumes and a 6.60 percent hike in active addresses count.

However, according to Arcane Research’s latest weekly update, Bitcoin balances held by exchanges are far from registering an improvement.

Source: Arcane Research

According to the attached chart, Bitcoin exchange addresses have lost more than 10 percent of the total BTC accumulation post-crash and the number is yet to improve on the charts. Arcane Research went on to highlight a couple of possibilities that may have led to the current scenario, including the increasing number of hodlers and a lack of trust in reputed exchanges. In this article, we will try to analyze both the assumptions.

Hodler’s narrative has definitely improved

Now, after the crash of the traditional market in March, it was speculated that many people were cashing out their Bitcoin in order to have liquid capital during the COVID-19 period. With market sentiment improving over the past few weeks, traders and investors have definitely come back into space, but they have been more inclined towards holding their BTC assets now.

The attached chart indicates that significant change in holding capacity was attained by BTC addresses held for 1-day (blue line), 1-week (pink line), and 1-month. The change exhibited is indicative of the fact that the number of hodling addresses over the past month has increased in the space.

Distrust in Exchanges and Recent Attacks

The distrustfulness of exchanges is a speculative read, but there is weight to this argument. It started with BitMEX’s allegedly intentional DDOS attack, one that made it impossible to trade on BitMEX. Many people blamed BitMEX for Bitcoin’s drop and suggested that the crash was partially caused or aggravated by the exchange’s handling of all the liquidated positions.

That sentiment was not helped by the fact that the price seemingly recovered after BitMEX went offline.

Other than that, crypto-attacks haven’t really done any favors to the reliability aspect of digital asset handlers.

Binance, one of the world’s largest crypto-exchanges, suffered a DDOS attack a few days back and even though no funds were lost, it was an indication that these exchanges and third-party institutions had a target on their back.

Defi entity dForce protocol registered a loss of 25 million in crypto, where even though the BTC in custody was not harmed or stolen, it wouldn’t improve the reliability aspect.

Although these assumptions cannot exactly be considered the prime reason for the fall in Bitcoin balances on exchanges, it certainly could have played a role.


Biraajmaan is a full-time journalist at AMBCrypto covering the US market. A graduate in Automobile engineering, he writes mainly about regulations and its impact with a focus on technological advancements in the crypto space.
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