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A researcher explains the exodus of ETH from exchanges

by SuperiorInvest

Blockchain analysis by researcher Nansen pointed to an outflow of Ether (ETH) and stablecoins from centralized exchanges due to the collapse of FTX.

Nansen Research analyst Sandra Leow posted a thread on Twitter that unpacks the current state of decentralized finance (DeFi) with a specific focus on the movement of ETH and stablecoins from exchanges.

Currently, the Ethereum 2.0 deposit contract contains more than 15 million ETH, while around 4 million wrapped ETH are held in the WETH deposit contract. Web3 development and investment infrastructure company Jump Trading owns over 2 million ETH tokens and is the third largest holder of ETH in the ecosystem.

Binance, Kraken, Bitfinex and Gemini wallets feature in the largest list of ETH balances, while the Arbitrum Layer 2 roll-up bridge also holds a significant amount of Ether.

As Leow explained in correspondence with Cointelegraph, the percentage increase in ETH held in smart contracts can be seen as an indicator of ETH flowing into various DeFi products. This includes decentralized exchanges, betting contracts and escrow services.

The recent collapse of FTX may have also led to concerns among users who hold assets with third-party custodians such as centralized exchanges. Leow highlighted the fact that the safety of funds held on exchanges may not be guaranteed:

“There’s an amplification to the quote, ‘Not your keys, not your coins,’ and that’s especially important in times like these.”

According to Nansen’s exchange flow dashboard, Jump Trading stands out as an entity with significant volumes of withdrawals from exchanges compared to their deposits. Leow presented a number of possible reasons for Jump Trading’s token movement, noting the company’s exposure liquidity serum (SRM) tokens:

“Since they were exposed to the FTX outage, they had to withdraw some tokens from exchanges that needed liquidity. In the last 7D we have seen Jump Trading pick ETH, BUSD, USDC, USDT, SNX, HFT, CHZ, CVX and various other tokens from multiple exchanges.”

A substantial amount of ETH has flowed from a number of major exchanges over the past seven days. $829 million worth of ETH left Gemini, while Upbit saw $797 million ETH move out of its account. Coinbase saw $597 million of ETH flow out, while Bitfinex also saw around $542 million worth of ETH withdrawn from its platform.

Last week also saw the movement of a significant amount of stablecoins from exchanges. $294 million worth of stablecoins flowed from Gemini, while Bitfinex saw $173 million move from its platform. KuCoin and Coinbase followed, with $138 million and $108 million worth of stablecoins withdrawn from both exchanges.

Leow also addressed the movement of stablecoins, telling Cointelegraph that outflows usually indicate that users are on the sidelines and capital is not flowing into the cryptocurrency space:

“Perhaps market contagion and a prolonged bear market are reducing traders’ appetite to actively invest and engage in the space.”

Nansen played his part in providing key findings to major ecosystem events in 2022. A blockchain analytics firm has delved into on-chain data to put together the collapse of Terra in May 2022.

This then followed deep dive into FTX collapsewith evidence suggesting collusion between the exchange and crypto trading firm Alameda Research. Both companies were created and managed by Sam Bankman-Fried.

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