Jan 23, 2020 11:48 AM | Justin Cai

Finding reliable data on crypto exchanges is a difficult task. A widely circulated report from Bitwise last year cast doubt on the reported trading volumes from exchanges themselves. In response, many exchange ranking sites and analytics firms have come up with metrics for assessing crypto exchanges and exchange volume. 


However, these metrics have their own drawbacks. They may exclude major exchanges, some are based on easy-to-fake metrics such as unique web visitors or app store rankings, and there’s often little transparency in terms of how they’re calculated.


In the hopes of finding a better, more transparent metric for measuring crypto exchanges, we decided to look at cold wallet storage using data from chain.info. Based on a set of assumptions about how transfers take place across deposit addresses, hot wallet addresses, and cold wallet address, we analyzed cold wallet addresses associated with major exchanges and their holdings.


Although this approach isn’t perfect ⁠— it’s still relying on some assumptions and likely can’t identify all cold wallet addresses with perfect accuracy ⁠— it does offer a major advantage over other exchange measurement metrics. Because this data comes from analysis of on-chain asset transfers, it would be quite difficult to fake. 


So, based on our analysis, which exchanges have the largest amount of Bitcoin in cold storage?


First: Coinbase has by far the highest amount of Bitcoin of all crypto exchanges, and its holdings grew substantially over the past year. Moreover, that growth was relatively steady, apparently unaffected by the up-and-downs in prices. It is set to exceed the 1,000,000 threshold very soon. 


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Coinbase’s apparent dominance and steady growth may be because it attracts a large share of long-term/institutional investors, who are less concerned with short term price swings. 


What about other major exchanges?


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In the chart above, we can see some significant differences. Binance maintained its position as the second-largest exchange for most of the year, and its holdings oscillated without showing an obvious trend. Bitfinex started the year in the third-place spot, but its holdings drained during the first quarter, and only recovered near the end of 2019. 


Bittrex, Bitstamp and Kraken, the fourth-, sixth- and seventh-largest exchanges at the start of the year, all had pretty flat trends in their holdings.  


Huobi may be the most interesting case. It jumped from fifth-largest to the second-largest over the course of 2019. It has been alleged that the bulk of PlusToken transactions were processed through Huobi, which, if true, could have accounted for this dramatic jump in rank. 


Among the bottom four exchanges (of those we analyzed), Coincheck, Bitflyer, Gate.io and OKex, three saw an increase in holdings. Coincheck saw a flat trend. 


In short, based on cold wallet holdings, Coinbase remains the largest crypto exchange, and its lead increased steadily over the past year. Exchanges including Binance, Bitfinex, Bittrex, Bitstamp, Kraken, and Coincheck saw relatively little change in their holdings in 2019. Huobi, Bitflyer, OKEx, and Gate.io all saw substantial increases.


Some caveats about our interpretation of the on-chain cold wallet data remains. Some of the vertical kinks in the graph above could in principle be due to new cold wallet addresses discovered by the algorithm or delays in data synchronization, rather than reflecting actual new balances deposited into the exchange. 


Exchange Token Price


Several of the exchanges we looked at offer their own exchange tokens, which led us to wonder: would the financial returns for these tokens over 2019 correlate with the exchanges’s cold wallet holdings?


There are two reasons why they might. First, more user deposits to an exchange means more users trading on that exchange, which would generate more revenue for that exchange. Second, a large cold wallet holding signals a high level of user assurance in case of a hack, fraud or other loss event, and which could mean users are more willing to hold the exchange’s token.


Binance, Huobi, Bitfinex, Gate.io, and OKEx offer their own tokens. We measured the returns of these exchange tokens against Bitcoin rather than fiat (to exclude the volatile price action of Bitcoin itself). 


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We see that Q1 2019 was particularly good for all exchange tokens, with over 100% gains, but the impressive return subsequently diminished over the rest of the year. By the end of the year, the top performers were OKEx (2x) and Huobi (1.3x). Binance Coin made major gains in the mid-year but failed to retain them. Gate.io and Bitfinex’s tokens both lost value over 2019.


Looking at this 2019 data, there may be some correlation between cold wallet holdings and exchange token price. Both Huobi and OKEx saw increases in both, while Bitfinex and Binance plateaued in both metrics. The outlier is Gate.io, which saw an increase in cold wallet holdings but a decrease in its token price. This may be because the holding by Gate.io is the lowest of all exchanges in our sample, so the effect of a change in its holding is not too significant in absolute terms.


While cold wallet storage is not the perfect metric for assessing crypto exchanges, it is an interesting data point that may offer hints at exchanges' user numbers, trading volumes, and revenues. Cold wallet storage is also relatively difficult to fake or game.


If you have a good idea for a data story, please don’t hesitate to reach out! Please send pitches and tips to:

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