Gate.io and Bybit Data Shows Traders are Steering Clear of Risk Assets for Now

Recent data from major cryptocurrency exchanges Gate.io and Bybit indicates that traders are moving away from volatile assets like Bitcoin and Ethereum and are opting for stablecoins instead. This shift occurs amid increased market volatility and diminishing expectations for interest rate cuts.

Key Takeaways

Declining Holdings: Bitcoin and Ethereum holdings on Bybit dropped significantly in October, while USDT (a popular stablecoin) balances surged.
Healthy Reserves: Despite the shift towards stablecoins, both exchanges maintain strong reserve ratios across their assets.
Market Pressures: Bitcoin prices have fallen, with large holders selling significant amounts of BTC, contributing to market instability.
Retail Participation Declines: Retail investor inflows have dramatically decreased, suggesting a shift towards ETF products or long-term holding strategies.

Gate and Bybit Data Shows Traders are Steering Clear of Risk Assets for Now

Traders Favor Stablecoins Over Risky Assets

Data from exchanges Gate.io and Bybit reveals a noticeable decrease in risk-taking among traders, with many moving their investments from volatile cryptocurrencies to stablecoins. Bybit reported a substantial decrease in user holdings for Bitcoin and Ethereum during October. Specifically, Bitcoin holdings fell by 3.13% to around 64,000 coins, and Ethereum saw a more drastic decline of 5%, now totaling 542,200 ETH. Conversely, USDT balances surged almost 28%, reaching approximately $6.389 billion.

This transition appears to be occurring as Bitcoin hovers around the $108,000 mark, coupled with Federal Reserve Chair Jerome Powell indicating a gradual approach to policy adjustments.

Gate and Bybit Data Shows Traders are Steering Clear of Risk Assets for Now

Exchanging Assets Amid Stable Reserves

Despite shifts in user asset holdings, both Bybit and Gate.io report maintaining robust reserve ratios. Bybit boasts a 103% reserve ratio for Bitcoin and a 101% ratio for Ethereum, indicating user balances are adequately backed by reserves in these popular tokens. For USDT, reserves hit an impressive 110%, reflecting the platform’s capacity to manage the increased demand for stablecoins.

Gate.io's latest figures show total reserves at $11.676 billion, boasting an overall reserve ratio of 124%. They reported 24,833 BTC in reserves against 18,537 in user holdings, resulting in an excess reserve ratio of 33.96%. For Ethereum, reserves rose to 419,096 tokens, improving the excess ratio to 25.93%. The USDT reserves grew to about $1.58 billion, comfortably covering user holdings of approximately $1.33 billion with an 18.74% buffer.

Gate and Bybit Data Shows Traders are Steering Clear of Risk Assets for Now

The reserves for various altcoins, including GT, DOGE, and XRP, exceeded 100%: GT at 150.98%, DOGE at 108.12%, and XRP at 116.66%. Gate has expanded its reserves to encompass almost 500 different types of user assets, utilizing a Merkle Tree and zk-SNARKs algorithm for verification.

Market Challenges Intensify as Investors Withdraw

Bitcoin slipped below $108,000 at the start of the week, marking an extension of a risk reset that gained momentum late last week. This downturn has transformed October's optimistic narrative of "Uptober" to one of "Red October" as traders transition into November.

Ether's value decreased by 3.8% to $3,737, while XRP fell by 3.1% to $2.43, contributing to a 3.1% overall drop in total cryptocurrency market capitalization, bringing it down to $3.69 trillion.

The holiday trading environment, with Tokyo closed for public holidays, further amplified price fluctuations during early Asian trading hours, as reported by Cryptonews. The heightened leverage accumulated in October left long positions at risk, and as prices fell, forced liquidations drove spot prices lower.

Traders have expressed diminished confidence in a swift easing cycle alongside a strengthening dollar as immediate catalysts behind the selloff. These downward pressures were exacerbated by large holders selling assets. Recent on-chain data from Lookonchain revealed that a notable whale, known as BitcoinOG, deposited about 13,000 BTC (valued at $1.48 billion) into Kraken since October 1, including a 500 BTC deposit on November 2. Early investor Owen Gunden transferred 3,265 BTC (worth about $364.5 million) to Kraken since October 21, activating long-dormant wallets.

Amidst this backdrop, retail participation has sharply declined. CryptoQuant's data indicates that daily inflows from smaller holders to Binance plummeted from around 552 BTC at the beginning of 2023 to merely 92 BTC now, reflecting an over 80% drop.

Gate and Bybit Data Shows Traders are Steering Clear of Risk Assets for Now

The 90-day moving average of retail inflows has decreased by more than five times since the launch of spot ETFs in January 2024. This decline suggests that many retail investors are either shifting their focus to ETF products or adopting a long-term holding strategy, allowing institutional investors and corporate treasury strategies to take the lead in market dynamics.

Notably, even institutional demand appears to be selective as these entities grapple with sustainability challenges. Eva Oberholzer, Chief Investment Officer at Ajna Capital, remarked, "When digital asset treasury companies trade below NAV, it signifies not a bubble burst but the market's struggle to value infrastructure amid a phase transition." She noted the similarities with internet infrastructure companies in 2001 and commented that institutional investors often evaluate these companies based on future utility value, which is currently being underestimated.

This changing landscape in the cryptocurrency market suggests a cautious approach from traders and investors alike, as the focus shifts to stability amid a backdrop of uncertainty.