Reported exchange balances appear precise because they are derived from a public ledger. The ledger records addresses rather than owners, so every such figure rests on attribution work.
Attribution starts from known addresses
An analyst identifies an address as belonging to an exchange through deposits made deliberately, published addresses, or public disclosures.
That address becomes a seed from which related addresses are inferred, since exchanges manage many addresses as one operation.
The result is an attributed cluster, and the reserve figure is the total balance the cluster holds at a point in time.
Clustering relies on behavioral heuristics
The common-input heuristic treats addresses spent together in one transaction as belonging to the same party, since spending requires all their keys.
Other signals include consolidation patterns moving deposits to a central address, recurring transfers between the same addresses and characteristic transaction structures.
Each heuristic can be wrong. Collaborative transaction techniques deliberately break the common-input assumption, and shared custody arrangements complicate ownership.
Custody arrangements blur the total
Some exchanges hold assets with third-party custodians, so the balance sits under the custodian's addresses rather than the exchange's cluster.
Others hold customer assets alongside their own, meaning a cluster total mixes obligations to customers with the company's own holdings.
Address rotation, migration to new wallet software and periodic reorganization all cause clusters to become stale unless continuously maintained.
Different providers report different numbers
Because attribution is proprietary and methodologies differ, two analytics firms can publish materially different reserve figures for the same exchange.
Neither is necessarily wrong. They are counting different address sets built with different rules and different update schedules.
Comparing figures across providers therefore requires reading their methodology notes, and comparing a single provider's series over time is more reliable than comparing across them.
Why the direction matters more than the level
Analysts generally treat the trend as more informative than the absolute figure, since a consistent methodology tracks change even when the level is uncertain.
Interpretation remains ambiguous. A declining balance may indicate assets moving to self-custody, a shift to a custodian, or an internal wallet reorganization.
Proof-of-reserve attestations address a related but distinct question, since they compare holdings against stated liabilities rather than estimating a balance from outside.
That distinction is the important one for a reader. An external estimate says what an address cluster appears to hold, while an attestation speaks to whether holdings cover what is owed.