March 2020 highlighted a turbulent time in the crypto-asset universe and Bitcoin is still incorporating several changes that took place following the flash crash on 12th March.
As BTC’s price plummeted below $4000, a recent glassnode study suggested that the number of Bitcoin flowing out of the exchanges has increased and over the month, BTC balance on various platforms was collectively down by 7 percent.
Bitcoin’s net flows incline towards exchange outflow
The chart in the discussion illustrated that Bitcoin’s net transfer volume from/to exchanges in terms of BTC suffered a major drop after the fall. Although BTC’s value has exhibited stability over the past few days, the new flow of Bitcoin into exchanges remained significantly low in comparison to the past 6 months.
Such a difference can be explained as the report stated,
“The volume of BTC flowing into exchanges spiked significantly when the price crashed, but has since declined. Exchange outflow also experienced a spike, but its subsequent decline has been smaller than that of inflow.”
Hence, exchange outflows were moving at a faster rate than inflows, succumbing to a reduction of 7 percent in terms of BTC balance for the crypto exchanges.
The number of BTC has fallen from 2.41 million in January to levels below 2.25 million tokens in exchanges, at press time.
Average size of BTC deposit may have increased
The report indicated that even though exchange inflows were at a state of decline right now, they continued to remain at relatively high levels when compared to the long-term historical period.
However, there was a stark difference between the number of deposits to exchanges in comparison to the volume of the deposits to the platforms.
The above discrepancy can be explained by the fact that the average size of BTC deposits may have increased during the price crash.
The chart indicated that the size of exchange deposits in the past have always varied under and around 1 BTC. A difference in range was recently observed when the mean value of exchange deposits spiked up to over 5 BTC, and it continued to hover around the higher range until the past week.
The report said,
“This disparity in the mean size of deposits vs. withdrawals, along with the disparity in the absolute amounts of deposits vs. withdrawals, explains why the net flow of BTC to exchanges is negative.”
It can be speculated that the reduction of BTC on exchanges end could be positive since it would reduce BTC liquidity and restrict the available supply.