Ethereum exchange inflows are more concentrated than Bitcoin

By fklivestolearn | Technicity | 29 Apr 2021

53% of all Ethereum deposited on exchanges comes from the top ten users as compared to 22% in Bitcoin


Itsounds all too cliched but Cryptos had yet another volatile week. The sell-off across broader financial markets, triggered by the news of the U.S administration’s plans to raise capital gains tax, spread to crypto markets as well. The move saw Bitcoin fall to $47,500 before rebounding to as high as $56,500. Ethereum, on the other hand, has been riding high on strong DeFi demand — the second-largest crypto just scored yet another all-time high earlier today, just shy of $2800.

Apart from the general rebound in financial markets, another factor that might have helped crypto sentiment was the report that JPMorgan may be getting ready to offer an actively managed bitcoin fund to its wealthiest clients — available as soon as this summer, with the institutional bitcoin shop NYDIG serving as JPMorgan Chase’s custodian provider.

Today’s discussion centers around the exchange inflows of the top two digital coins. Exchange inflows have become a closely watched metric to understand how much cryptocurrency is about to be sold. According to Chainalysis Market Intel, 81% of bitcoin exchange inflows have been from exchanges since the start of 2020, as compared to 61% of Ethereum exchange inflows in the same period.

The chart on the right (above) shows that exchanges have far more active deposit addresses for bitcoin overall than they do for Ethereum — since the beginning of 2020, an average of 132k users are depositing bitcoin on exchanges daily as compared to 23k users per day for Ethereum, therefore, BTC has 5x more on-chain exchange users than Ethereum.

For the analysis, the daily users are taken as the upper bound, considering a user may have multiple deposit addresses. Also, the number of users is taken as the lower bound since a vast majority of centralized exchange users interact with the exchange alone — never transferring the assets to the blockchain itself.

The most noticeable observation in this analysis was the Ethereum exchange inflows concentration by a few users — Since June 2020, the ten users who deposit the most Ethereum on exchanges are responsible for 53% of all Ethereum deposited, compared to 22% for the top ten bitcoin depositors. Before DeFi (Jun. 2020) and decentralized exchanges became established, the concentration of inflows to the top deposit addresses was similar across Bitcoin and Ethereum, as shown in the left chart above.

An Increasing concentration of Ethereum inflows to exchanges suggests there is much less competition amongst sellers of Ethereum on exchanges relative to Bitcoin. The fact that competition amongst sellers of Ethereum dropped as DeFi and decentralized exchanges took off also suggests that these markets are more dominated by a few insiders than centralized exchanges are.

To summarize, Ethereum inflows have become more concentrated ever since DeFi and decentralized exchanges became established, pointing to the domination of a few insiders.

Originally Published on Medium

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Prolific Blogger on Medium with my own publication Technicity. Extensive trading experience in Forex & Stocks based on technical studies. Cryptocurrency trader and Enthusiast, Blockchain/Fintech Evangelist & generally just a Technology Freak.


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