Exchanges Observe Massive BTC Outflows
Bitcoin whales have been on an accumulation spree in April 2022 since the premier cryptocurrency dipped below $40k. Whales are entities that hold more than a million dollars of cryptocurrency in a single wallet.
The Coinbase exchange observed massive outflows from its BTC reserve in April 2022, indicating that institutional investors are buying the cryptocurrency at a lower price point. Analytics firm CryptoQuant reported that an estimated 30000 BTC worth $1.2B were withdrawn from Coinbase’s reserves on 15 April 2022.
Santiment market research observed 4000 whale transactions exceeding one million dollars in the week ending on 18 April 2022. Insider Report suggested that there were 10000 BTC whales, at that time comprising 40% of the market.
Monero Community Declares Bank Run
The Monero community announced a “bank run” on 18 April, 2022, which they are calling a “Monerun”. The community action is a response to a perceived lack of transparency shown by centralized cryptocurrency exchanges.
Monero enthusiasts alleged that the exchanges have misrepresented their XMR reserves and restricted withdrawals. Pseudonymous Reddit user bawdyanarchist explained that “We’re pulling out funds from any exchanges that have not disabled withdrawals.”
The user also reported that the obfuscated ledger technology behind Monero allows centralized exchanges to cover up the amount of the cryptocurrency that they actually hold. The exchanges can pull this tactic off only because they believe that most holders will not withdraw their XMR.
Seth Simmons, an information security engineer, said, “More and more exchanges are paper trading Monero and lying about how much they have to customers. Opt-out, get those keys off exchanges, and own your XMR.”
To test this theory, the Monero community organized withdrawals of XMR from exchanges on 18 April 2022, which caused the price to increase by as much as 14%. As of this date, XMR is currently the 32nd biggest cryptocurrency, with a market capitalization of $4.2 billion.
BTC Mining Difficulty Drops
According to BTC.com, Bitcoin mining difficulty declined by 1.26% on 14 April, 2022, with the BTC price plunging below $40000, making it the third downturn since the start of 2022.
Mining difficulty is a metric used to measure the amount of computation a miner would need to perform to find the next block on the network. The difficulty level readjusts after every 2016 blocks is mined based on the computational power plugged into the network: at the block height of 731808 attained on 18 April, 2022 and following two consecutive drops, the mining difficulty was 28 trillion.
This decrease in mining difficulty might have resulted from miners shutting down their operations to conserve energy. The Chinese mining crackdown in 2021 forced many miners from the country to migrate to more friendly jurisdictions. Kazakhstan became the second-largest Bitcoin mining market after the United States, as many displaced miners set up their operations in that country. However, a new wave of migration is emerging as Bitcoin miners are leaving Kazakhstan due to unreliable power supplies and increasing government interference.
Shadowbans Drive Indian Exchanges to P2P Trade
Indian Crypto Exchanges are adopting peer-to-peer (P2P) transactions to escape restrictions imposed by the government and banks throughout the country.
In a P2P transaction, the exchange matches a buyer with a seller to allow them to trade directly, often facilitated by self-executing code such as a smart contract.
The seller in a P2P transaction locks the requested amount of cryptocurrency in escrow until the buyer confirms his payment using various traditional payment platforms. The transaction is completed only after both parties have agreed to complete the transfer. This model allows the crypto exchange to limit its interaction with banks by outsourcing the payment process to the users.
Indian exchanges are forced to adopt P2P as the traditional banking apparatus in the country is engaged in shadow banning crypto transactions in order to limit the adoption of digital assets in the country. Although the Indian administration claims not to impede growth of new innovative technologies, this activity suggest otherwise.
The shadow bans and payment restrictions imposed by India’s Central Bank Reserve Bank have substantially slowed development in the industry. Only days after the American cryptocurrency exchange Coinbase made its debut in India in April 2022, it was forced to let go of its payments partner due to alleged pressure from the Central Bank. Coinbase planned to use the Unified Payments Interface (UPI) on its Indian affiliate, but the state regulator objected to the proposition, stating that no other exchanges are using UPI.