Crypto exchange Bitfinex now holds more Ethereum (ETH) than the total value locked (TVL) in USD of ETH in the decentralized finance (DeFi) market. The platform is also increasing its exposure to Tether (USDT) with its balance of the stablecoin continuing to rise since mid-March 2020.
Meanwhile, the Bitcoin (BTC) balance on Bitfinex has taken a sharp downturn over the same period, dropping by more than 50%. The preference for USDT over BTC might point towards the expectation of an imminent price drop for Bitcoin hence exchanges like Bitfinex choosing to limit their exposure to the top-ranked cryptocurrency by market capitalization.
Bitfinex Outstrips DeFi Market in Ethereum Holdings
Taking data from crypto analytics platform Glassnode, Elias Simos of blockchain venture fund Decentral Park Capital tweeted that Bitfinex’s ETH balance is now greater than the TVL (in USD) of Ethereum in the DeFi market. An excerpt from the tweet reads:
“Since mid-March, the balance of ETH on Bitfinex has increased from ~2.5M to ~4M ETH. Over the same period, ~3B Tether has printed on the Ethereum chain.”
According to data from DeFi market tracker DeFi Pulse, the TVL for the DeFi market currently stands at $835.5 million. This figure has been steadily on the rise since taking a massive hit on “Black Thursday” when ETH flash crashed by about 50%. There are currently 2.7M ETH ‘coins’ locked in the DeFi market.
Source: DeFi Pulse
For Simos, three explanations exist for Bitfinex’s increased appetite for the second-ranked crypto by market capitalization. The first likely reason has to do with the crypto exchange looking to profit from staking in ETH 2.0.
Some crypto pundits have predicted that the staking upgrade coming in ETH 2.0 will act as a catalyst for a massive Ethereum price bull run. Thus far, the launch of ETH 2.0 has been beset with delays with project co-founder Vitalik Buterin earlier this week revealing work on the update was still on track.
Simos also opined that Bitfinex could be doubling up on ETH to cover gas costs associated with USDT transactions on Ethereum while also enjoying greater funding rates on the crypto itself than DeFi. Tether transaction volume on Ethereum has increased significantly and was even the cause of network stagnation back in late 2019.
BTC Balance on Bitfinex Down 50% Since March
Bitfinex holding more USDT comes as Tether has been on a massive printing spree, minting millions of its stablecoin almost on a daily basis. Back in April, Blockonomi reported that Tether’s market capitalization had crossed the $7 billion mark. As of press time, Tether’s valuation has grown by over $1.5 billion in double-quick time and is now on the cusp of dethroning XRP from the third position on the crypto market cap log.
While Bitfinex increases its ETH and USDT holdings, the Bitcoin balance held in the exchange continues to decline rapidly, a point also raised by Simos. Data from Coin Metrics shows a 50% drop in Bitfinex’s BTC stash beginning from mid-March 2020.
This period coincides with the Black Thursday panic that saw Bitcoin fall to $3,800 as the entire crypto market capitalization fell by about 50%. The sudden price plummet caused a cascade of forced liquidations across many cryptocurrency derivatives exchanges in a wipeout that echoed similar crashes in the broader financial market.
Since Black Thursday, Bitfinex has seen its Bitcoin balance fall from 193,900 BTC to 93,800 BTC, a shortfall of 100,000 BTC in two months. BitMEX, another crypto derivatives exchange has also seen a similar drop in its Bitcoin holdings, decreasing from 315,700 BTC to 216,000 BTC within the same period.