Chainalysis Archive

Bitcoin flowing through exchanges has realised $78 billon of gains, half since November

18 February 2021
    • Cryptocurrency prices again reach all time highs, but the data suggests that large investors are cautious at $50k, trimming holdings by 192k bitcoin last week, although this caution is being balanced by retail demand on exchanges, which often follows the momentum of the market.
    • The realised gain of bitcoin between entering and exiting exchanges is $78 billion over all time. That is to say, if all the bitcoin ever deposited on exchanges was bought immediately and then only sold when it was withdrawn, the profit from that trade so far would be $78 billion.
    • 54% of that $78 billion gain has been made in the 15 weeks since the start of November 2020. 25% was made in Q4 of 2017. So we are in the second phase of people rapidly realising large USD gains from bitcoin, and the profits in this phase are twice the size of the last phase.

Cryptocurrency prices again reached all time highs this week, although percentage gains were not as extreme as last week. The bitcoin price went over $52k, and is $51,837 as of 2 pm Eastern Time on Thursday 18 February, an 8% gain since the close of last Thursday 11 February. The Ethereum price is $1,928, also an 8% gain over the last seven days.

The short term outlook is hard to judge. Bitcoin inflows to exchanges are low, with a 7 day average inflow of 61k bitcoin compared to the 30 day average of 81k bitcoin. Bitcoin trade intensity is rising, with the 7 day average median trade intensity at 6.8 bitcoin traded for every bitcoin flowing into exchanges, compared to 6.4 for the 30 day average and 4.7 for the 180 day average. Low inflows and high trade intensity when price is rising suggests that bitcoin available to buy is falling while demand is rising, which indicates prices should rise. However, other data, such as the data I discussed last week, suggests there may be an increase in trading off of exchanges, for example via Over The Counter (OTC) brokers. So exchanges may not be giving a full picture of market conditions.

Large investors, who typically trade OTC, appear to have reduced their holdings, by 192k bitcoin in the week of 8 February. All types of large investors, new as well as longer term holders, trimmed their positions as shown in the chart below. Last week I said that for the price level to be maintained there needed to be more bitcoin bought by large investors, not less. Yet the price kept climbing this week.

It feels to me that we are in a ‘wait and see’ moment. The bitcoin price above $50k is extraordinary and recent gains have been rapid, although some would call it an overnight success 12 years in the making. It seems that large investors are cautious at $50k but this is being balanced by retail demand on exchanges, which often follows the momentum of the market.

But while the short term outlook may be ‘wait and see’, from a longer term perspective it is clear that bitcoin is in a new phase. I see this in the data on USD gains that are being realised as people take profits. We have not yet had the 2021 version of the January 2018 New York Times’ article Everyone Is Getting Hilariously Rich and You’re Not, but we are now in the second period of people rapidly realising large USD gains from bitcoin, with the first being in late 2017.

I measure realised gains as the difference between the price when bitcoin is received and when it is sent. This is similar to the Spent Output Profit Ratio (SOPR) but, as Chainalysis maps addresses to real world entities, realised gains are calculated for entities. This is more accurate and provides insight into who is realising their gains.

Before I present the data, I want to give definitions and caveats, as the results are so interesting. For each entity, we calculate their average cost of acquiring bitcoin using the price when the entity received the bitcoin. This is a weighted average across all bitcoin received by the entity, accounting for bitcoin sent by the entity. When an entity sends bitcoin, the difference between the current price and the acquisition cost gives the USD gain that would be realised if the bitcoin were being sent to be sold. This realised USD gain can be summed across all the bitcoin sent, and these gains can be accumulated over time, to give the total realised gains of an entity over time. In the chart below, I show the total realised gains occurring on services, primarily exchanges, over time. I also have data on the realised gains of traders and investors and so on.

Not all bitcoin that is sent is sold, so this data shows the maximum possible realised gain. Also, it is only data for bitcoin that is moved on the blockchain, so it does not capture gains that are realised in trades on centralised exchanges. That said, the realised gain for exchanges does capture at least the gain made between the bitcoin entering and exiting the exchange, and bitcoin sent to exchanges is typically sent to be sold. A final caveat is that this data is experimental and could be refined further.

Now that I’ve built up suspense by giving technical definitions and caveats, what does the data show? Bitcoin that has entered and exited services, primarily exchanges, has made a realised gain of up to $78 billion between entering and exiting. That is to say, people who have withdrawn bitcoin from exchanges have paid $78 billion more for their bitcoin than it cost when it was deposited. Or another way of putting it is that if all the bitcoin ever deposited on exchanges was bought immediately and then only sold when it was withdrawn, the profit from that trade so far would be $78 billion.

What is even more extraordinary is that only 13% of this $78 billion gain was made before the start of Q4 of 2017. Then in just the three months of Q4 of 2017, the late 2017 bull run, 25% of this gain was made. Then from the start of 2018 until November 2020, only 8% of this gain was realised, with losses actually being incurred until Q2 of 2019. Since November 2020, in the last 15 weeks, 54% of this gain has been made. By this measure, more money was made in bitcoin in the last 15 weeks than was made ever before.

As I described, there are caveats, including that more recent outflows from exchanges tend to be overstated as some apparent outflows are later identified as internal transfers, which means recent realised gains would be revised down.

But the trend is clear: we are in a phase where some people are getting hilariously rich. The last phase of this was late 2017, but the realised gain on exchanges then was half of what it is now. And the gains being made now are equal to half of all the gains that have ever been made.

I’ll keep refining the data, but there is no doubt it is a wild time to be involved in cryptocurrency. As always, email me at if you have any questions. You can also join me, Ambre, CEO of Kaiko, and Tara, CEO of Lantern Ventures as we discuss “What the data tells us about Bitcoin’s 2020 rally” on 24 February at 12 pm Eastern Time. It will be a unique event as between the three of us we cover on-chain data, trade data, and the execution of trading strategies. You can register here.

Philip Gradwell, Chief Economist

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