Will ETH escrow data decline due to violent price fluctuations?

On November 23, the well-known blockchain researcher Hasu issued the following statement, which sparked controversy on Crypto Twitter.

One of the definitions of self-hosted ETH is to store ETH on your own address instead of trusting a third party to provide protection for us. Although Etherscan does not have a view of the Bitcoin blockchain , we have marked it in Ethereum and marked a large number of top escrow addresses: exchanges.

Here, we checked the ETH balance or total value lock (TVL) of these exchanges and their inflows and outflows.

Hosted TVL

The total balance of more than 300 transaction addresses is as high as 18 million ETH, which is equivalent to 77 billion U.S. dollars.

This is equivalent to 15.5% of all ETH supply. An additional 1.7% of ETH is pledged for investment through transactions in the Beacon (Eth2) deposit contract.

Analyzing the storage balance of each exchange, we found that Coinbase currently has the most ETH, topping the list with $29 billion. In second place is Binance (Binance accounts for nearly one-third of the total number of Bitcoins). Kraken, Bitfinex and Gemini are among the top five.

Note: The numbers shown here are only based on addresses recognized by Etherscan or Viewbase.

For comparison, the two non-custodial addresses with the most ETH—Beacon deposit contracts and Wrapped ETH tokens—hold $36 billion and $31 billion, respectively.

From the top Ethereum account

Another way to check TVL is to compare it with transaction volume. A look at CoinMarketCap will reveal some interesting data. Although Crypto.com and KuCoin are ranked 11th and 12th respectively on TVL, they are higher on the 24-hour trading volume list, at 3rd and 7th respectively.

Comparing the ratio of TVL to the top 20 trading volume, the daily trading volume of Crypto.com and KuCoin are 227% and 173% of TVL, respectively. At the other extreme, the transactions of Gemini (1%), Bitfinex (2%), Kraken (3%) and Coinbase (4%) account for only a small portion of their ETH holdings.

Source: CoinMarketCap

Custody in and out

Although Coinbase has the most ETH, most of their assets are stored in cold wallets or inactive wallets. From the perspective of exchange deposits and withdrawals, Binance is far ahead. Coinbase, Kraken, Bitfinex, Huobi, Gemini and FTX also contributed a large amount of trading volume.

Deposit to the exchange every month

Monthly withdrawals from the exchange

A popular heuristic used by traders to predict price changes (and chart providers trying to sell their services) is to look at deposits and withdrawals in and out of exchanges. A large amount of deposits heralds an impending sell-off (people send their ETH to the exchange to sell), and the opposite situation is withdrawals. How do these numbers match the heuristics?

Daily net deposit vs ETH price

The daily inflows and outflows seem inconclusive. The only exception is the period at the end of May, when ETH hit a record high, and then the price plummeted, which is closely related to the large amount of deposits entering the exchange.

A comprehensive analysis of escrow addresses may need to include more addresses, from miner addresses to exchange deposit addresses, and the term itself may need to be better clarified (should it include smart contracts with management keys or trading funds?) Analysis is only the first step in finding the answer.