Conventional wisdom suggests that when big amounts of bitcoin (BTC, -0.91%) exit exchanges, the hodlers are socking away coins in their cold-storage hoards, presumably forever. The reality is more complicated than that, and bitcoin outflows in 2021 have a lot more to do with another important digital asset: stablecoins.
But first, how we got here: The crypto industry still isn’t happy about FinCEN’s proposal to require crypto exchanges to collect data on both sides of any outflow transactions. Now, crypto advocates have a civil liberties group taking their side in comments on the proposal. That caused me to wonder, just how much money are we talking about?
The chart above shows the estimated notional value of bitcoin flowing out of exchange wallets, summed by month. The real number is probably larger. Notably, Coinbase goes to greater lengths than most exchanges to disguise its Bitcoin addresses and therefore the largest U.S.-accessible exchange by volume is almost certainly undercounted here.
However, $60 billion a month is nothing to sneeze at. It’s no wonder regulators are paying attention to these flows.
Much of the increase in outflows is due to bitcoin’s extraordinary Q1 price run. It was a record first quarter for the orange coin. Historically, for whatever reason, the first quarter has been a weak one, with negative returns in five of the past seven years, according to CoinDesk Research. In 2021, bitcoin rose 103% on the quarter.
That’s not the whole story, however. Last week saw another record: a single-day high-water mark in bitcoin-denominated outflows, with 1,365 BTC transferred off exchanges in a 24-hour period.
To Know More…