ON–053: CeFi

This is issue #53 of the on-chain analytics newsletter that reaches nearly 7000 crypto investors every week 📈

1inch, whose v2 offers the best rates by discovering the most efficient swapping routes across all DEXes—swap on the customizable new UI. And also Aave, where you can experience DeFi: Deposit, Earn, & Borrow on Aave.

This week our contributor analysts cover Capital Flows: Exchange Flows and Institutional Buying + OTC Activity.

• Traditionally, the focus of exchange flows has been around centralized exchanges. But 2020 was the year when DEXs started dominating on-chain flows - in particular Uniswap. Naturally, you'd expect DEXs to have relatively more on-chain volume as every trade involves an on-chain transaction. On a centralized exchange, in/outflows take place when users deposit/withdraw. Still, looking at on-chain ETH flows, it's striking just how present DEXs have become (Source).

• Now, what about the recent price action - is that reflected in exchange flows? Let’s look at stablecoins in particular. Since the start of 2021, there's been a net inflow of stablecoins to exchanges every single day (except for 1 day: Jan 2nd). The chart below shows the last 6 months of net exchange flow of ERC-20 stablecoins. (Source).

• Which exchanges hold the most stablecoins? By far the largest exchange in stablecoin holdings is Binance, which holds >$1B in BUSD, >$500M in USDT, >$500M in USDC, plus other stablecoins. (Source).

• If you break down massive Coinbase BTC outflows, it usually goes to cold wallets that only have in-going transactions. Since Coinbase Custody is directly integrated with Coinbase's OTC desk, some of these massive outflows would indicate OTC deals.

• Coinbase outflows on Jan 2 were an all-time high. It seems institutions have bought BTC below 32k. If you look at the block time frame, there have been significant outflows since this past July. (Source).

• Fund Flow Ratio for all exchanges is the ratio of network transaction volume of exchanges among the entire tokens transferred on the network. If this value goes up, it implies most of the network TXs are exchange deposits/withdrawals. Otherwise, TX volumes are coming from non-exchange wallets. Since the price is eventually determined on exchanges, massive non-exchange transaction volume is considered as a bullish signal. These transactions include OTC deals. For now, only 5% of the network transactions are used for exchange deposits/withdrawals. This happened in Feb 2019 as well when major exchanges launched OTC desks. (Source)

• Tokens Transferred is the number of Bitcoins transferred on the network. If this value goes up and the fund flow ratio for all exchanges goes down, it implies that huge OTC deals are on-going. 2.75M of BTC moved yesterday including change transactions. (Source)