Analysts Can’t Agree on What Prompted Big Spike in New Bitcoin Addresses

Bitcoin has seen a rapid rise in the creation of addresses on the blockchain so far this month, with one industry executive saying it’s likely due to traders moving funds off the legally troubled BitMEX exchange. Others point elsewhere.

  • The “entities net growth” metric from analytics firm Glassnode, which measures the daily change in unique entities or clusters of addresses controlled by a single participant, rose sharply by 244% from 9,750 to 33,620 in the first six days of October.
  • Tuesday’s tally of 33,620 was the highest since Oct. 3, 2018.
  • The surge in new entities noticeably picked up the pace in the wake of U.S. authorities’ recent decision to bring civil and criminal charges against cryptocurrency derivatives trading platform BitMEX and users’ resulting panicked migration of funds to other exchanges.
  • BitMEX has witnessed an outflow of at least 40,000 BTC (worth around $424 million at press time) since the charges were announced on Oct. 1.
  • Many of these coins have migrated to addresses belonging to major exchanges like Kraken, Binance and Gemini, and a good number of these addresses have been newly generated, according to Alex Melikhov, CEO and founder of Equilibrium and the EOSDT stablecoin.
  • “That has been a viable reason for the spike in new entities,” Melikhov told CoinDesk in a Telegram chat.
  • However, on-chain analyst Cole Garner disagrees, saying the spike in new entities probably represents an entry of new investors into the market and has little to do with the BitMEX issue.
  • That’s because the metric has continued to rise over the past five days even though BitMEX withdrawals cooled following an initial spike from Oct. 1–2.
  • “If BitMEX were responsible for address growth, the metric would have moved in lockstep with the outflow of funds from the exchange,” Garner tweeted Tuesday.
  • Melikhov countered that bitcoin’s flat price undermined that argument, adding, “If new investors entered market, the cryptocurrency would have rallied.”.
  • A third theory making the rounds is that Chinese media's recent and unusual reports calling cryptocurrency the year’s best-performing asset maybe have caused local investors to put some cash into the bitcoin market.
  • Melikhov said that was a more speculative theory.
  • The cryptocurrency is trading near $10,600 at press time, having faced rejection near $10,800 on Tuesday.
  • Disclosure: The author holds small positions in bitcoin and litecoin.

Also read: Bitcoin’s Options Market Retains Long-Term Bull Bias Despite Sluggish Price

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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