Introduction

“I think there are a lot of zombie exchanges still, and we don’t trade on a lot of them because we think a lot of them are zombies.”

Evgeny Gaevoy, Founder and CEO of Wintermute (Source: Chopping Block Podcast).

The crypto industry is rife with tales of rags to riches, as well as riches to rags. The same is true with exchanges. In 2022, many participants were found to be over-levered and insolvent as asset prices fell. BlockFi, Celsius, and most significantly, FTX were among big consumer-facing names that went bankrupt. Many of these companies were insolvent months before it became public knowledge.

This report looks at historic and recent CEX flows from one of the most prominent market makers in crypto - Wintermute.

Wintermute is an algorithmic trading firm and one of the most active market makers in crypto. According to its website, it provides liquidity on “over 50 exchanges and trading platforms”. The report looks at various timeframes, including both before and after the FTX collapse. Exchanges that Wintermute has stopped interacting with may be due to them not fitting with their operations or other reasons. In addition, this only looks at on-chain flows.

Our Approach

Using Nansen labels, we examined withdrawals and deposits over various time frames from Wintermute-labeled addresses to CEX addresses.

Data Discovery and Limitations

First, there may be addresses that have not yet been tagged as Wintermute (or CEXs), so this analysis is a general glimpse into Wintermute’s CEX counterparty activity and not necessarily the entire picture.

Another limitation is the total USD flows. To obtain them, daily prices were used for the given tokens being transferred between CEXs/CeFi and Wintermute. Given intraday volatility, this may result in USD flows not being 100% accurate.

We focus exclusively on Ethereum mainnet, as the majority of activity occurs on Ethereum. This means that non-Ethereum activity will be missing from the findings.

Finally, before we get into it, note that no assertions are made or implied regarding the financial health of companies that Wintermute has interacted with.

Key Findings

• The top exchanges Wintermute has interacted with the most on-chain from May 2023 through August 2023 are Binance, Coinbase, and Kraken by a large margin. The on-chain interactions measured include aggregate USD deposits and withdrawals, as well as overall transaction counts.
• Notable exchanges it appears to have significantly reduced their on-chain flows to include Huobi and Crypto.com, compared to its flows in 2022.

Wintermute CEX Flows Over Time

The bar chart below represents monthly deposits and withdrawals across CEXs since March 1, 2022. We chose this starting point as it marks the lead-up to the UST de-peg (commencing May 7, 2022) and LUNA collapse which precipitated many bankruptcies that ended up unfolding months later.

Many CEXs were allegedly already insolvent before their issues became public knowledge. We are interested in finding out whether Wintermute’s on-chain activity can give us any insight into  the state of these exchanges.

The chart shows the large increase in the overall flows during November 2022, lining up with the FTX bankruptcy, followed by relatively consistent flows until April 2023. Volumes dropped significantly from May 2023 through August 2023 (-80%) compared to the previous four months (January - April).

The chart below shows that price action has not gone down significantly to account for their 80% decrease in CEX USD flows. Between January-April 2023, the price rose around 60% - whereas between May-August 2023, the price has remained relatively sideways - albeit with some downward volatility.

The below table shows Wintermute's exchange flows since January 2020 for a high level historic overview. Note that the figures here are unlikely fully accurate - but are intended to serve as a general glimpse into Wintermute's on-chain activity.

Diving into the USD flows over time, the top 5 CEXs that Wintermute has interacted with since the start of 2020, ranked by deposits and withdrawals were the following:

1. Binance
2. Coinbase
3. Kraken
4. FTX
5. OKX

We examine flows to these CEXs (except FTX which is covered in a later section) over the same time period (March 2022 - Aug 2023) next.

Binance is the number one CEX counterparty of Wintermute based on transactions, withdrawals and deposits by USD since January 2020. It is the CEX that Wintermute utilizes the most by a wide margin - outpacing 2nd ranked Coinbase's USD deposits by approximately 46% and withdrawals by approximately 70%.

As Evgeny said on a the Chopping Block podcast:

“...as a trading firm, you cannot not trade on Binance, you might as well just close up shop... it’s pointless… that's where most of the liquidity is currently”.

Volumes to Binance have reduced since May 2023, in line with Wintermute's trading activity. Specifically, there has been an approximately 65% reduction in the overall average flows comparing Jan-April 2023 and May-Aug 2023. This reduction in USD flows is actually less than the average across all CEXs (-80%).

Wintermute’s Coinbase flows increased dramatically in November 2022, lining up with the FTX crash. Interestingly, it was mainly withdrawals from the exchange in November 2022. Following this, both withdrawals and deposits to the exchange have remained relatively even. Like other CEXs, activity has since dropped off since April 2023. Note that this does not include Coinbase Custody, which is labeled as its own separate entity.

Kraken is ranked 3rd by both deposits and 2nd by withdrawals since 2020.

Flows have significantly dropped off since May 2023, although Wintermute continues to actively use the platform for both deposits and withdrawals.

It is interesting to see that Wintermute’s withdrawals from Kraken have generally exceeded its deposits to the exchange in recent months. However, the data indicates that Kraken still remains as one of Wintermute’s most interacted CEXs.

OKX’s flows have fluctuated since March 2022, with the last 4 months seeing significantly reduced activity. These flows make up a fraction of the flows from January-April 2023, similar to other CEXs - albeit to a larger degree with OKX. It is perhaps noteworthy that the majority of flows since the LUNA collapse have been withdrawals (approximately 360% of the total deposits during the period). Wintermute has overall greatly reduced its activity with OKX relative to its other frequented CEXs.

Interesting Interactions

Crypto.com is a notable large exchange that Wintermute appears to have reduced its on-chain interactions with. Note that Wintermute’s activity with Crypto.com has been very minimal since November 2022 - around the time of the FTX collapse.

Interestingly, Wintermute appears to have significantly reduced its interactions with Huobi since July 2022.

Wintermute Interactions with Bankrupt Exchanges

In May 2022 (when LUNA and UST collapsed), Wintermute made large deposits and withdrawals to-and-from FTX. However, in the subsequent months they primarily had withdrawals from the platform, especially from June-August 2022, where withdrawals accounted for more than 90% of total flows. September 2022 saw more balanced net flows having some deposits as well - but on a smaller scale than previously. Overall, from June-November 2022, withdrawals amounted to around 870% of deposit amount. October and November 2022 (when FTX collapsed) saw barely any volumes.

Evgeny had confirmed that they were also affected by the FTX bankruptcy but made an interesting note on the liquid side of their company:

“...if you count liquid as part of FTX, like we didn’t really have anything on liquid anyways…” in response to losing liquid funds on exchanges, specifically FTX.

In short, Wintermute’s flows on-chain indicate that they were decreasing their exposure to FTX in the lead-up to FTX’s collapse.

Celsius filed for Chapter 11 Bankruptcy in July 2022. The data shows that Wintermute deposited into the platform in the two months prior.

Wintermute's activity with FTX US was primarily withdrawals over the time period examined.

Bittrex (US) filed for Bankruptcy in May 2023. Note that their non-US business remains operational. Wintermute withdrew heavily from Bittrex around the time of the LUNA collapse (May 2022). It continued interacting with the exchange until around September 2022, where meaningful activity drops off.

BlockFi filed for bankruptcy in November 2022. The vast majority of Wintermute activity observed were withdrawals from the platform. The majority of these occurred between May-July 2022. This was around the time when BlockFi was in financial difficulty - which appeared to have eased in July 2022 with the announcement that FTX would bail it out. Unfortunately, at that time, the state of FTX's insolvency had yet to be surfaced.

Voyager went bankrupt in July 2022. Interestingly, Wintermute primarily deposited onto the platform in the months leading up to the bankruptcy.

Wintermute’s Activity Examined Over Different Timeframes

Note that the figures below are unlikely fully accurate - but are intended to serve as a general glimpse into Wintermute's on-chain activity.

The above table shows the exchanges that Wintermute-labeled wallets interacted with since Jan 1, 2020. We use this table to show at a high level who Wintermute had interacted with historically. Of the existing exchanges, Binance, Kraken, and Coinbase have the highest flows with Wintermute.

Between the period January 2020 and November 2022 (when FTX collapsed), Wintermute addresses labeled by Nansen stopped interacting with the following exchanges:

• BTSE (October 2021)
• Poloniex (May 2022)
• HitBTC (withdrawals only)
• FTX (November 2022)
• FTX US (November 2022)
• Liquid (bankrupt)
• bitFlyer (withdrawals only)

It stopped depositing into:

• AscendEx (September 2022)
• Bitpanda (July 2022)
• MEXC (September 2022)
• Gemini (September 2022)

Below is a list of exchanges that Wintermute had interacted with following the FTX collapse up (November 2022) until May 1, 2023.

Wintermute's Recent Operations

Finally, we look at Wintermute’s activity over the last ~4 months. This period of time was selected as a short-term lookback window, which includes news around SEC actions against Coinbase and Binance in the US.

Compared to the last period (FTX collapse Nov 12, 2022 to May 1, 2023), tagged Wintermute wallets have no on-chain transactions with the following CEXs:

• MEXC
• AscendEx
• Deribit
• Blockchain.com
• Bitpanda
• Crypto.com
• Gemini
• BlockFi (bankrupt)
• Bittrex (bankrupt in US - global business operational)
• Hodlnaut (bankrupt)

It stopped depositing into:

• Huobi