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Onchain Analysis

What happens to the Binance BTC-B Bitcoin wallet?

As is always the case, large amounts of bitcoin on the chain create extreme excitement, euphoria or panic, even more extreme excitement when the movement occurs from one of the addresses owned by larger exchanges: Binance.

Big movements from Binance Wallet

During the early hours of November 18, 2022 , from the address traceable to Binance dedicated to the BTC-B peg 3LYJfcfHPXYJreMsASk2jkn69LWEYKzexb various movements to and from, through multiple addresses all traceable to Binance are reported.

It is important to know up front that all movements are zero-sum, meaning that the same amount of Bitcoin is in Binance wallets both before and after the movements.

The certainty that the wallet is traceable to Binance and dedicated to the BTC-B peg comes directly from the owner of the address according to several sources :

What is BTC-B and how does it work?

According to Binance’s own definition, BTC-B is :

Bitcoin BEP2 (BTCB) is a token on Binance Chain issued by Binance, where the price is pegged to BTC at a rate of 1 BTCB = 1 BTC. BTCB is 100% backed by the same amount of BTC in our public reserve address below.

Binance Press Release

and again :

The main benefit of offering crypto-pegged tokens is that, obviously, this makes available to Binance DEX traders the many coins that have their own blockchains and aren’t native on BNB Chain.

Binance Press Release

Simply put, Binance stores Bitcoin reserves in a dedicated address, verifiable address to ensure liquidity on its chain.

Bitcoin Binance reserves track liquidity. The more liquidity on the Binance chain, the more Bitcoin reserves are held in reserves.

Will the Bitcoin removed from liquidity be SOLD at market?

This question will not be answered, but you will give yourself an answer, and the whole thing is based on logic. To give you an answer you first need to understand how liquidity works on the Binance chain, and again we quote Binance’s words :

This provides an easy way for anyone to convert from the pegged token back into the native coin on Binance.com. If this buy order is filled, a new order will be placed while an equal amount of funds will be deposited from the reserve address into Binance.com. The sum of the buy order and the funds on the published reserve address will be bigger than the total supply of the pegged token, ensuring there is always 100% backing.

If those Bitcoin were subtracted from the reserves of the Binance BTC-B address this is a consequence of liquidity leaving the Binance chain, not the other way around. If there is less liquidity on the Binance chain less Bitcoin are needed as collateral, not the other way around.

Is this liquidity outflow bullish or bearish?

This Bitcoin liquidity coming out of the BTC-B reserve addresses are neither bearish nor bullish, but reflect what on the Binance chain HAS ALREADY HAPPENED.

The fear instilled by some people is a very sad story!

BtcInOutAlert, 18 November 2022

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