The impact of Coinbase's wallet cleanup strategy on on-chain analysis and industry challenges

The post by CryptoQuant CEO Ki Young Ju, which became a hot topic on the X platform, highlights fundamental issues regarding transparency in the blockchain industry. It points out that the increasing complexity of fund management addresses under the guise of privacy protection, promoted by Coinbase, is leading to a decline in on-chain analysis accuracy. This issue is a critical theme affecting the overall trustworthiness of the entire cryptocurrency market, including perpetual markets.

The Balance Challenge Between Privacy Protection and Data Transparency

Regarding Coinbase’s published AOP (Account Balance), Ki Young Ju made an important observation. The company’s published data combines the balances of regular exchange accounts and custody accounts, making it extremely difficult to distinguish between the two accurately. This ambiguity poses a significant challenge for on-chain analysts trying to assess the actual reserve status of exchanges.

While privacy protection is undoubtedly important, a certain level of transparency is essential for building trust across the industry. As regulatory scrutiny intensifies, it is understandable that Coinbase would strengthen its information management policies. However, losing data readability in the process could instead cause market participants to feel uneasy.

CryptoQuant’s Development of a New Clustering Technology

In response to these challenges, CryptoQuant has adopted a unique approach. The company’s technical team reverse-engineered Coinbase’s latest fund flow patterns and adjusted their custom clustering logic. As a result, they established a system capable of tracking and capturing nearly all real-time Bitcoin inflows and outflows.

Currently, CryptoQuant’s platform only marks wallets that have been verified to belong to Coinbase with 100% certainty. This cautious approach aims to avoid false positives and suggests that high reserve figures displayed by other platforms do not necessarily imply high accuracy.

The Need for Continuous Improvement in Analysis Accuracy—Focusing on the Perpetual Market

Improving on-chain analysis accuracy is not merely a technical challenge but a matter directly linked to the overall health of the market. Especially in highly leveraged trading environments like the perpetual market, real-time wallet movements significantly influence price formation. In this sense, ongoing improvements in accurate on-chain analysis benefit all market participants.

CryptoQuant’s efforts demonstrate a proactive industry response to these challenges. Balancing privacy protection with transparency and innovating to provide more accurate data will be key to the future development of the industry.