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The state of crypto – January 2023

Mads Eberhardt 400x400
Mads Eberhardt

Cryptocurrency Analyst

Summary:  As 2022 becomes 2023, the exchange balances of Bitcoin and Ether are at a 4-year low. However, due to the non-existing volatility in December, market makers and active traders have likely reduced their exposure on centralized exchanges, and thus it may not matter that much in terms of accumulation in privately held wallets. Similar to the whole of 2022, exchange-traded Bitcoin products saw an inflow, whereas exchange-traded Ethereum products saw an outflow in December.


Immediately upon interacting with a blockchain, much data becomes publicly available on a public ledger. Analyzing this data may provide crypto traders and investors with helpful insight into the present state of the market. In “The state of crypto”, we take a look at the most important metrics to observe the market based on transaction and trading activity. Our main focus is the two largest cryptocurrencies Bitcoin and Ethereum, and we divide the metrics into short-term and long-term indicators. You find the report for the last month here.

Short-term

In November 2022, the crypto market withdrew billions worth of crypto assets from exchanges, following the collapse of crypto exchange FTX earlier in November. This flow continued throughout the last month of 2022, where around 0.4% and 0.8% of Bitcoin’s and Ethereum’s total supply were withdrawn from exchanges, respectively. For both Bitcoin and Ethereum, the percentages on exchanges are at a 4-year low. As to Ethereum, it is approaching its all-time low set in May 2018. At that point, 10.5% of the Ether supply was on exchanges. This net outflow of funds from exchanges is largely due to fear of other collapses. Nevertheless, the metric suggests that many holders arguably have a long-term view, potentially limiting short-term selling pressure.

On the other hand, the decreasing exchange balances might merely be a result of the non-existing volatility in December, causing market makers and active traders to reduce risk on centralized exchanges by withdrawing funds when they can no longer profit from volatility. In that situation, the liquidity is less dense than normal, making the trading environment poorer.

In December, it is primarily the mid-size wallets controlling 10 – 100 BTC and 100 – 1,000 BTC which have increased their share of the total supply. For Ethereum, particularly wallets with between 100 to 1,000 Ether have increased in importance, whereas wallets controlling 1,000 – 10,000 and 10,000 – 100,000 Ether have been flat in the past months. The accumulation of more wealthy wallets is in contrast to most of last year, in which the same wallets were mostly flat or even decreasing their holdings.

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Exchange Balance in Percent. During times when crypto investors are more inclined to sell crypto, they often store their cryptocurrencies directly on an exchange to prepare to sell their holdings. On the contrary, they often move the funds to private wallets when they are less likely to liquidate them. In other words, low exchange balances on exchanges are often perceived as valuable for a potential upward trajectory. Source: Santiment
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Dormant Circulation. Shows how many Bitcoins and Ether were moved after not being moved for at least 365 days prior to that – accumulated on a daily basis. A high number may express eagerness from long-term holders to liquidate their portfolios. Source: Santiment
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Supply Distribution for BTC. This illustrates the supply distribution in percent of Bitcoin and Ethereum based on the amount addresses hold. This may indicate which groups are buying or selling, for instance, whether whales are selling or buying. Source: Santiment
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Supply Distribution for ETH. Source: Santiment

Long-term

As expected, the low volatility in December has neither caused the circulating supply of the last 5 years nor the average profit or loss to fluctuate.

In December, the flow to and from crypto ETPs, mutual funds, and OTC trusts summarized the year as a whole brilliantly. From the 1st of December to the 16th of December, $5.1mn flowed toward exchange-traded Bitcoin products, whereas exchange-traded Ethereum products experienced an $11.7mn outflow in the same period. This is similar to the whole year, in which exchange-traded Bitcoin products experienced an inflow of $333.5mn, whereas exchange-traded Ethereum products experienced a $290.7mn outflow in 2022.

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Circulating Supply (5 years). For Bitcoin and Ethereum, there are continuously issued new Bitcoins and Ether to the supply, respectively. However, it may be the case that someone is permanently unable to access their wallet, which means the supply technically is lower. By looking at Bitcoin’s and Ethereum’s supply that has moved in the past 5 years, we might better interpret the authentic supply and whether large inactive wallets suddenly turn active. Source: Santiment
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Market Value to Realized Value (MVRV) Ratio (5 years). The market value to realized value ratio (MVRV) calculates the average profit or loss of all holders based on when each token last moved over the past 5 years. For example, if the MVRV ratio is 1.5, holders are on average estimated to be up by 50%. Source: Santiment
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Daily Active Addresses. This expresses the amount of active Bitcoin and Ethereum addresses daily. It illustrates the utilization of the two blockchains, respectively. It is perceived as valuable with many active addresses.
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Inflow and Outflow in ETPs, mutual funds, and OTC trusts. CoinShares publishes a weekly report on inflow or outflow into crypto ETPs, mutual funds, and OTC trusts. Since these products are particularly popular among more traditional investors, an inflow or outflow may describe the sentiment among this group of crypto investors.
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Source: Saxo
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Source: Saxo

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