Deposit Addresses

Understanding Deposit Addresses

When a user wishes to deposit into an exchange, two transactions take place:

  1. Coins are transferred from a personal wallet to a temporary wallet, which is created by the exchange for each individual user.
  2. Coins are then moved from this temporary wallet to the main exchange wallet.

wallet-to-exchange-flow

These temporary wallets are referred to as deposit addresses or deposits. They provide valuable insights into the behavior of a specific network.

Analyzing deposit addresses can be beneficial in several ways:

  1. The total number of deposit addresses can serve as a reliable indicator of the actual number of people trading a specific coin on the exchanges. While not 100% accurate, as a single person may have multiple deposit addresses, it provides a clear upper limit on the total number of users and works well dynamically.

  2. Network-level metrics, such as total transaction volume, do not provide detailed information about different sections of network activity. Distinguishing which part of total network activity is generated by deposit addresses allows for a more granular exploration of a specific market event.

  3. Monitoring the activity of deposit addresses can help us examine and predict market movements with a new level of awareness.

Our metric for deposit addresses:

Daily Active Deposits (DAD)

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