Where are funds moving after SEC sues Coinbase? Ether outpacing Bitcoin withdrawals

Key Takeaways

• The SEC sued Binance on Monday and Coinbase on Tuesday
• 5% of Coinbase’s Ethereum balance was withdrawn Tuesday, with around 3% of Binance’s reserves withdrawn
• Overall, the movements are not significant compared to previous episodes or average daily outflows
• Bitcoin saw even less withdrawals, negligible amounts withdrawn from each exchange
• Coinbase’s lawsuit presents as the more intriguing of the two, with the exchange floating on the Nasdaq stock exchange in 2021 and overtly striving for clear regulation

The great regulatory clampdown of 2023 stepped up a notch this week, as the SEC filed lawsuits against the two biggest exchanges on the planet. Binance was sued Monday, and Coinbase got the same treatment less than 24 hours later. 

In this piece, we look on-chain to see what the money is saying, as the crypto space digests the news. 

Bitcoin withdrawals relatively steady

On Binance, the Bitcoin balance has dropped from 704,000 on Sunday to 689,000 Tuesday. That represents an outflow of around 15,000 Bitcoin – totally insignificant compared to both the total balance and the normal balance flow we see over any given 48 hour period.  

Coinbase were sued a day later (Tuesday compared to Monday), so we have less of a period to work with. But there has been nothing unusual here either, an outflow of 550 Bitcoin on Tuesday a negligible flow of around 0.1% of the total balance.  

Hence, there really is nothing to see with regards to Bitcoin’s on-chain movements, at least as of Wednesday morning when I am compiling this. Bitcoin’s price has also rebounded well, trading at $26,800. Prior to the lawsuits, it traded at $27,000. It was trading at around $25,500 for most of Monday, down 5.5%, before bouncing back. 

Ethereum withdrawals increasing from exchanges

On the Ethereum side, things are different. Flows are not crazy, but are certainly notable. Tuesday saw nearly 5% of Coinbase’s ETH withdrawn, with Binance releasing around 3%. 

This is likely related to the nature of the lawsuits themselves, a key crux of which alleges a violation of securities law. The SEC listed an laundry list of tokens as securities, however Ethereum was a notable omission. Nonetheless, SEC chair Gary Gensler has refused to comment on whether ETH does or does not constitute a security, and there has been much speculation (and fear) in…