Situation

FTX is a cryptocurrency exchange, the purpose of which is to offer their clients a space to exchange digital currencies for other digital currencies or for traditional money and vice versa.

FTX has its own token called FTT, which trading agents or operators use for operations such as payment of transaction fees. Last year, Changpeng Zhao (the CEO of Binance) sold his stake in FTX back to Sam Bankman-Fried (the ex-CEO of FTX), who made a partial payment with FTT tokens.

On November 2nd, the cryptocurrency news site CoinDesk reported that a document had reportedly been leaked showing that Alameda Research, a hedge fund operated by Sam Bankman-Fried, had a rather unusual large number of FTT tokens. In theory, FTX and Alameda are separate companies, but the story implied they had close financial ties.

Binance announced on November 6th its intention to sell its FTT tokens “due to recent revelations.” In response, the price of FTT plummeted and traders rushed to abandon FTX, fearing it would become yet another crypto company in disgrace.

FTX had difficulty processing withdrawal requests, which totaled around $6 billion in three days. Later, it came to have liquidity problems, since it did not have enough money to cover the requests received.

On November 8th, Binance indicated that it had reached an agreement to buy FTX to bail it out. However, Zhao added in that announcement, “Binance has the option to withdraw from the agreement at any time.” In a simultaneous announcement, Bankman-Fried said the agreement would protect clients and allow FTX to finish processing requested withdrawals. He tried to calm the jitters around the rumors of a conflict between FTX and Binance and even said: “We are in the best hands”.

On November 9th, Binance announced that it had decided not to purchase FTX, “after completing the due process audit of the company.” In addition, he cited regulatory investigations and reports on mismanagement of funds. Before announcing its bankruptcy, FTX had communicated that it had reached an agreement with the blockchain platform Tron to exchange some FTX tokens to other cryptocurrency wallets.

The cryptocurrency industry has long struggled to convince regulators, investors, and ordinary customers that it is trustworthy. The fall of FTX, which seemed more stable than other companies, in addition to the withdrawal of Binance from the purchase, have shocked the market.

The price of FTTs is down about 80 percent since November 8th. The price of BTC and ETH, (the top tokens by market capitalization) has fluctuated wildly since November 8th; at one point, it suffered a drop of more than 20 percent.

Aim of this dashboard

This dashboard analyzes the impact that these news have had on the Optimism blockchain’s related centralized exchanges (Binance, Coinbase and Kucoin). It is no secret that after such an event, most users in the crypto space are scared of the volatility that it might keep having on crypto tokens. Moreover, after seeing one of the top 3 exchanges go bankrupt in a matter of days, many users have decided to move their funds out of centralized exchanges (CEXs) to cold wallets. All metrics shown have a timespan corresponding to the last 30 days, but the number of days from the current date can be changed using the Days_From_Current_Date parameter above.

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• Over the last 30 days, Binance has been leading in the total number of depositors, with 8157 unique users, which represent a share of 72.6% amongst the three CEXs. November 8th was the day with the highest number of deposits on Binance (680 deposits).

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• In terms of users withdrawing, Binance had 34.421 users during the past 30 days, which represent a share of a 93%. Clearly, the number of withdrawers has been over twice the number of depositors over the last month. After the recent FTX news, the number of depositors decreased, while the number of withdrawers increased.

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• Coinbase’s users were quicker to react to the news, as there was a spike of users depositing, which represented a x38 increase from the previous day.

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• Coinbase increased by 5 times the number of users withdrawing from the exchange since the Coindesk report was released on November 2nd.

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• Kucoin’s users were the last to deposit on the CEX, as the biggest spike happened on November 12th of 476 depositors.

• However, on the following day the number of withdrawers grew even higher to 622.

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• Two days after the Coindesk report was released, a spike on the number of deposits made on Binance for the Optimism blockchain happened. The number of deposits went down for a couple of days, but when Binance indicated that it had reached an agreement to buy FTX to bail it out, this number spiked even higher. However, recently after the news of Binance completing the due process audit of the company and rectifying their decision a large number of withdrawals occured. It makes sense as most people were scared of the same situation happening in the near future to other CEXs.

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• Despite the number of depositors and withdrawers being higher on Kucoin than on Coinbase, the total number of deposits and withdrawals are actually higher on Coinbase on a daily basis.

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• Coinbase had a massive increase of deposits on November 4th, but this was a very unique situation. On the other hand, the number of deposits/day has been consistently higher than during the previous weeks since November 4th.

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• Kucoin has seen more volatility both in deposits and withdrawals compared to Binance and Coinbase.

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• The charts above show a clear dominance of Binance over the other two CEXs int terms of volume. Its share is higher than a 96% for both deposits and withdrawals.

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• The inflows and outflows of Binance have been very volatile, but very consistent in terms of trends between each other.

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• Surprisingly, despite the bad news for the crypto space, the majority of days have had more volume going into Binance and Coinbase than going out from them.

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• On the other hand, Kucoin has had more outflows than inflows recently. This might be because Kucoin allows to operate on the exchange (with some limits) without doing KYC. This is the mandatory process of identifying and verifying the client's identity. Thus, the profile of users that operate in this exchange might be leaning more towards using it to move funds around anonimally rather than holding them long term on this exchange.

• The average deposit size on Binance is 10 times larger than Kucoin’s and 87 times larger than Coinbase’s. This is because Binance is widely known as a “safe” CEX due to its good reputation for institutional money. Thus, despite also having many retail investors, the big sums of money invested by institutional organizations or big whales increase the average deposit size on this exchange.

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• There have been 6 peaks of larger deposit and withdrawal sizes than usual on Binance since November 2nd. This were mainly affected by the news that came out about FTX, which caused large investors to panic and move their funds out of the exchange to cold wallets to mitigate risks, as well as to deposit them on Binance to trade tokens with high volatility and take profits of the situation. Both profiles of investors can be seen above through these peaks of large deposit/withdrawal sizes.

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• The average withdrawal size on Coinbase was much smaller than the average deposit size after November 2nd.

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• On the other hand, Kucoin did not follow a clear pattern on deposit/withdrawal sizes, as some days had bigger deposit sizes while some others had larger withdrawal sizes.

• It makes sense to see that Binance is the exchange where most transaction fees are paid, as there are more transactions and more volume.

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• This number is highly correlated to the number of transactions, as the more transactions wanting to be processed the more demand there is to get them approved, and thus more gas has to be spent to validate the transaction.

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• 20% more fees were paid for withdrawals compared to deposits on Binance.

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• Kucoin and Coinbase had more fees paid on withdrawals too. This is because there have been more withdrawals than deposits recently for all exchanges. Another reason is because as the recent bad news were being released, users rushed to withdraw their funds from exchanges creating periods of crazy high activity for small time windows.

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• Binance is the exchange with the average highest fees paid per deposit transaction. However, it is the exchange with the lowest fees paid per withdrawal transaction.

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• This is because the deposit size is much higher than the withdrawal size. Thus, users with more funds to send don’t care much about the fees they have to pay, while exhanges with lower budget users tend to wait for low activity timeframes to do their transactions.

Methodology

The data used in this analysis was collected by combining the information on the fact_transactions, dim_labels and fact_hourly_token_prices tables of the Optimism database.

• The first table was used to query the transactions information on Optimism.
• To filter the transactions, these were joined using the second table for the CEXs available (Binance, Coinbase and Kucoin).
• The third table provided the data regarding the price of ETH in USD. This was used to calculate the transaction fees paid per transaction in USD, as they are shown in ETH by default.

Conclusion

Let’s summarize what the situation has been like for each CEX after the first FTX news came out from Coindesk on November 2nd:

• Binance:

  • 4.4 times more users withdrawing than depositing
  • 2.2 times more withdrawals than deposits
  • 1.5 times more amount deposited than withdrawn
  • The deposit size is 3.3 times higher than the withdrawal size
  • Similar transaction fees paid on deposits and withdrawals
  • 2.3 times more transaction fees paid per deposit than per withdrawal

• Coinbase:

  • 5 times more users depositing than withdrawing
  • 2.8 times more withdrawals than deposits
  • 1.3 times more amount deposited than withdrawn
  • The deposit size is 3.7 times higher than the withdrawal size
  • 2.4 times more transaction fees paid on withdrawals than deposits
  • 1.2 times more transaction fees paid per deposit than per withdrawal

• Kucoin:

  • 1.4 times more users withdrawing than depositing
  • 2.3 times more withdrawals than deposits
  • 1.2 times more amount withdrawn than deposited
  • The deposit size is 1.9 times higher than the withdrawal size
  • 2.9 times more transaction fees paid on withdrawals than deposits
  • 1.2 times more transaction fees paid per withdrawal than per deposit

Glossary

The aim of this section is to provide definitions/additional information on topics mentioned throughout the dashboard:

• Centralized Exchange (CEX): these are platforms which facilitate the buying and selling of cryptocurrencies. They function as trusted intermediaries in trades, and often act as custodians by storing and protecting the users funds.
• Institutional Money: An institutional investor is a company or organization that invests money on behalf of clients or members. Hedge funds, mutual funds, and endowments are examples of institutional investors. Institutional investors are considered savvier than the average investor and are often subject to less regulatory oversight. The buying and selling of large positions by institutional investors can create supply and demand imbalances that result in sudden price moves in stocks, bonds, or other assets.
• Whales: are people or organizations who own large amounts of crypto. Whales can also manipulate the market with their massive wealth.
• Know Your Customer (KYC): it is the practice carried out by companies to verify the identity of their clients in compliance with legal requirements and current laws and regulations. It aims to protect financial institutions against fraud, corruption, money laundering and terrorist financing.
• Binance/Coinbase/Kucoin: according to the coinmarketcap exchange ranking, Binance and Coinbase are the two best CEXs by exchange score, while Kucoin is 5th. CoinMarketCap ranks and scores exchanges based on the following: Web Traffic Factor; Average Liquidity; Volume, as well as the Confidence that the volume reported by an exchange is legitimate.

Fees

Deposit/Withdrawal Size

Deposited/Withdrawn Amount

Number of Deposits/Withdrawals

Users

Introduction