Throughout the cryptocurrency space there is a lot of measuring that goes on. People want to know the best token, the best cryptocurrency, the best blockchain, exchange, project, person, company etc. The list is endless, and some of the metrics are hard to read.

Exchanges and coins, for instance, are big on stats and data. People want to know the market capitalisation and trading volume of certain coins and exchanges, but are often met with the notorious fake volumes that plague the space.

But one interesting data point that has come to light thanks to LongHash is the amount an exchange holds in cold storage and how it influences the success of that business. This metric is a lot harder to fake, and there is a small correlation to the success of each exchange token.

Coinbase leads the way

It is pretty unsurprising to see that Coinbase, one of the biggest exchanges in the world, despite its US bias, has the biggest cold storage of coins. It is not even the base level of cold storage the company has, it is its ever-growing stocks. Looking at the last 12 months, Coinbase’s cold storage has grown significantly, and constantly.

One reason for this, as outlined by LongHash, is that Coinbase is a big player on the institutional scene.

“Coinbase’s apparent dominance and steady growth may be because it attracts a large share of long-term/institutional investors, who are less concerned with short term price swings,” the report said.

With regards to other major exchanges, there is a varying display of patterns to note. Some kept relatively steady over the last year, while others dipped and grew. There are also some that made big steps up while a few barely added anything to their stores.

“Binance maintained its position as the second-largest exchange for most of the year, and its holdings oscillated without showing an obvious trend. Bitfinex started the year in the third-place spot, but its holdings drained during the first quarter, and only recovered near the end of 2019,” explained LongHash

“Bittrex, Bitstamp and Kraken, the fourth-, sixth- and seventh-largest exchanges at the start of the year, all had pretty flat trends in their holdings.”

Effect on token prices

The data on cold storage does not mean much in isolation, but the link between the performance of some of these exchanges’ native tokens and their cold storage paint a small picture.

“Looking at this 2019 data, there may be some correlation between cold wallet holdings and exchange token price. Both Huobi and OKEx saw increases in both, while Bitfinex and Binance plateaued in both metrics,” it was concluded.

“The outlier is Gate.io, which saw an increase in cold wallet holdings but a decrease in its token price. This may be because the holding by Gate.io is the lowest of all exchanges in our sample, so the effect of a change in its holding is not too significant in absolute terms.”

“While cold wallet storage is not the perfect metric for assessing crypto exchanges, it is an interesting data point that may offer hints at exchanges’ user numbers, trading volumes, and revenues. Cold wallet storage is also relatively difficult to fake or game.”

