Decoding Chainalysis research report: How retail traders, veterans, and institutions contribute value to exchanges?

How do traders add value to exchanges? A look at Chainalysis report.

Who are the “premium customers” of CEX among retail investors, veterans, and institutions? What are their trading behaviors and characteristics? TechFlow Deep Tide analyzed the report from Chainalysis on user behavior patterns related to exchanges.

Market Situation: Bitcoin prices rose by over 50% in 2023, and user numbers continue to grow. However, CEX faces challenges as the number of active exchanges has decreased from 750 to 640, and DEXs have brought significant competitive pressure. This means that CEX needs to segment their users more and focus on attracting and retaining those users who will bring the most value to their business.

Different users have different amounts of funds and absolute numbers. As expected, there are more retail addresses, but their total assets are not as high as institutions. In addition, most of the weekly active wallets are late retail users. These users have created wallets for a short period of time, and the balance in each wallet is low.

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Overview of the flow of funds from different users in CEX: Late institutional wallets account for the largest share of the total value sent to centralized exchanges, at 23.6%. Late professional and early retail wallets follow closely, accounting for 18.8% and 19.0%, respectively. In addition, after entering 2023, the amount of funds flowing into CEX from all users has been shrinking.

Retail users are more likely to leave: the churn rate is used to measure when a user no longer has financial transactions with CEX, indicating inactivity or a possible drop out of the market. Data shows that the churn rate of early retail wallets is much higher than any other category, at 15.7% per week, while the churn rate of late professional and late retail wallets is the lowest, at 0.6% and 0.4%, respectively.

Reference: https://twitter.com/techflowpost/status/1673244259087192064

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