Poloniex's Bitcoin reserves are plummeting despite Justin Sun's best efforts

Things are not looking good for cryptocurrency exchange Poloniex. According to a report by data analysts Coin Metrics, there are signs that Poloniex is shrinking massively as an exchange, despite the efforts of Tron CEO Justin Sun who partnered with the exchange in November 2019 and has been promoting it relentlessly on his social media channels.

The report shows the amount of Bitcoin (BTC) held in Poloniex's on-chain wallet has practically collapsed in the last 18 months. It adds that the amount of BTC held by an exchange is widely used as a proxy for exchange activity, since a low balance indicates a small number of users trading at the exchange, showing that the exchange is in poor health.

Coincidentally (or perhaps not), the bulk of Poloniex's decline came after it was acquired by Circle in February 2018. Shortly after, the exchange saw its BTC and Ethereum (ETH) holdings fall to their lowest levels since 2016 after being spun out to an Asian investor group that Sun says he isn't part of.

This is despite Circle claiming that it had made enormous progress with the exchange, including "massive infrastructure improvements, adding more fiat options with USDC integration."

In line with this, Coin Metrics checked the number of WebSocket API users, and found a stark correlation. Not only has the amount of BTC held in reserves dropped by more than 70% in the last 18 months, but the number of API users has also fallen by a similar number, and now sits at around 4,000 users online at any given time. This is further evidence that fewer traders are using the exchange.