Growing Danger Signals... Coins Disappearing from Exchanges

Bitcoin and Stablecoin Exchange Holdings Decrease
"Decline in Trading Volume Evidences Reduced Investor Interest"

[Asia Economy Reporter Lee Jung-yoon] As the downturn in the coin market prolongs, the quantity of virtual assets such as Bitcoin circulating on exchanges is showing record lows.

According to virtual asset data firm CryptoQuant on the 29th, the amount of Bitcoin held on exchanges was recorded at 2,157,347 coins as of the previous day. Until early last month, before the global exchange FTX liquidity crisis, the amount of Bitcoin held on exchanges was 2,500,018 coins. However, it has continuously declined since then, and on the 19th, it dropped to 2,140,197 coins, the lowest since CryptoQuant began tracking on December 28, 2019.

When the amount of Bitcoin held on exchanges decreases, buying pressure tends to exceed selling pressure, causing coin prices to rise. However, after the FTX incident, Bitcoin prices fell by more than $4,000, and recently, the market has cooled, with prices staying in the $16,000 range for over ten days, leading to a decrease in the quantity circulating on exchanges. On the 28th and 29th, Bitcoin prices also recorded a decline of over 1%. The drop in the Nasdaq index, which is centered on tech stocks that show synchronization with Bitcoin prices, and concerns about an economic recession influenced this trend.

This decrease in Bitcoin holdings on exchanges has also led to a sharp drop in trading volume. According to data from CoinMarketCap, a global virtual asset market information site, Bitcoin's trading volume on the 28th was $17.0571 billion (approximately 21.5615 trillion KRW). Compared to the average daily trading volume of $30.911 billion in October, this represents a 44.97% plunge. It also decreased by 39.54% compared to the average daily trading volume of $28.12881 billion from the 12th to the 30th of last month, following the panic sell-off caused by the FTX incident. On the 24th of this month, daily trading volume even fell below $10 billion.

[Image source=Reuters·Yonhap News]

A bigger problem is that stablecoins, which serve as a means of transaction in the highly volatile virtual asset market, are showing a similar pattern. The total amount of stablecoins held on exchanges decreased by 24.03%, from 35,877,143,484 coins on the 4th of last month to 27,256,763,479 coins on the 28th of this month. This is a level similar to that of November 2021.

Stablecoins are virtual assets designed to be pegged to fiat currencies and are mainly used as a means of transaction. As the downturn prolongs, investors are withdrawing funds rather than using stablecoins for trading.

Experts explain that it is becoming difficult to earn profits through coin trading, causing it to fall out of investors' interest. Professor Hong Ki-hoon of the Department of Business Administration at Hongik University said, "The foundation of the coin market itself is collapsing due to incidents like the FTX crisis," adding, "The fact that trading volume is decreasing essentially means that investors are losing interest."