How Did Investors React to the SEC, Binance, Coinbase Fiasco? Glassnode Reports

Glassnode published a report on Monday breaking down investors’ on-chain behavior after the U.S. Securities and Exchange Commission (SEC) sued two of the world’s largest cryptocurrency exchanges. 

The report acknowledged a boost to the number of short-term crypto holders sending their balances onto exchanges. 

Exchange Deposits and Withdrawals

The report echoed findings from last week showing that Binance experienced significantly higher withdrawals immediately following the SEC’s Monday filing. The platform’s Bitcoin and Ethereum balances have fallen by 40,200 BTC (5.7%) and 324,000 ETH (7.1%) respectively over the past 7 days. 

Meanwhile, Binance’s stablecoin balance took the biggest hit, declining by $1.6 billion (20.9%) over the past week. Since FTX’s collapse in November 2022, Binance’s stablecoin balance has fallen a whopping 75% from $26 billion to just $6.5 billion today – largely spurred by another SEC crackdown against its Paxos-issued BUSD stablecoin. 

“The exchange still holds some of the largest reserves of any entity on-chain, and their BTC and ETH balances are still quite substantial,” clarified Glassnode.

Coinbase – which was sued the day after Binance for multiple securities law violations – faced relatively smaller Bitcoin (BTC) withdrawals of just 2300 BTC (0.5%). However, Ethereum withdrawals were much more pronounced at 291,000 ETH (8.0%), possibly indicating heightened investor fear around the company’s staking-as-a-service product. 

Behavior By Cohort

Investor behavior surrounding exchanges also seemed to differ by cohort: transactions of under $10 million comprised consistent withdrawals, while those over $10 million were consistent deposits, with net inflows ranging between $15 million to $30 million per day. 

“This suggests that very large entities (such as institutions) are more affected to a greater extent by the SEC news as compared to smaller entities,” wrote Glassnode. 

Furthermore, short-term crypto holders are showing heightened activity, accounting for 76% of recent BTC deposit volume (versus the typical 60%). Such deposits accounted for 0.93% of short-term holders’ total held balances on exchanges. By contrast, long-term holders showed “no discernible reaction to the news.” 

Analysis from CryptoQuant suggests that even short-term holders are reluctant to sell their coins too heavily, as the cohort is waiting for a chance to realize more profit from its purchases. 

The entire crypto market slid after the SEC’s lawsuits last week, with heightened pain among coins specifically targeted by the agency’s Coinbase filing: Solana (SOL), Cardano (ADA), and Polygon (MATIC).