Though the ratio of a crypto asset's supply on exchanges may not seem to have an immediate impact on prices, the long-term correlations between coins moving away from exchanges while prices move up, is quite evident.
Let's take a look at three ERC-20 assets that are showing this pattern as a volatile week in crypto full of price retracements is coming to an end:
Crypto's #2 market cap asset has seen quite the pullback since its retrace from above $2k last week. However, ETH's supply isn't budging away from offline wallets.
Bancor's supply moving away from exchanges had a lot to do with its ability to hit a 2-year high $6.17 last week. BNT supply is now 71.7% below its one-year average.
KNC's supply has jumped to 39.2% after being as low as 36.1% on January 31st. On the long-term scale, the amount of tokens is still 17% lower than its one-year average.
Sometimes one or two major individual transactions alone are enough to reveal that a whale selloff may send an asset spiraling.
Here are a few assets seeing HUGE transactions the last few days:
Aave - $304M (2/24)
Aave saw its 2nd largest transaction (in USD) this year as a whale AAVE address sent 828.6k tokens to an exchange address.
Prices haven't moved much yet, but historically these kinds of transactions will foreshadow a further price slide when combined with high exchange inflow.
Kyber Network - $26M (2/22)
KNC had a flurry of large transactions Monday, including 13m tokens swapping exchange addresses.
The spike in on-chain transaction volume and exchange inflow has predictably sent KNC downward.
0x Protocol - $44M (2/19)
The 28M ZRX tokens sent from a whale to exchange address marked the highest USD value transfer in the token's 3.5-year history.
Prices have been very volatile since, but it did drop massively during the market-wide correction Monday.
Bitcoin shot up to a record-setting ~$58.3k on Sunday. And if you were watching, you would have seen a massive exchange inflow spike:
There were 59,915 BTC in a single hour, just as prices jumped over $58,300. This was the largest spike in 16 weeks. And for context, the 200-hour resting average was sitting at 5,032 BTC moved to exchanges per hour. This means this spike was 1,091% higher than the recent mean.
We can also look at how this spike looked from an Exchange Flow Balance (Inflow minus Outflow) perspective:
Generally, when not preceded by a big outflow, inflow spikes lead to price corrections.
This exchange inflow was assisted by the 2nd largest BTC transaction of 2021 to a large whale address, which instantly disposed of the funds.
The address history shows similar patterns, going all the way back to a contributive quick sell-off on Black Thursday.