A wallet does not read the blockchain directly. It sends requests to a node, usually operated by a third party, and that operator sees every request the wallet makes.
Wallets are clients, not nodes
Displaying a balance requires querying chain state, which requires a node holding that state, and running one requires substantial storage and bandwidth.
Wallet software therefore connects to a remote node over a defined interface and asks it questions on the user's behalf.
Most wallets ship with a default provider configured, so the connection is established before the user has considered who is on the other end.
What the requests reveal
A balance query names the address being asked about, so the provider learns which addresses a given connection is interested in.
Requests carry standard network metadata including the originating address of the connection, which can link chain addresses to a network location and to each other.
Because a wallet queries every address it manages, the provider can associate addresses a user has deliberately kept separate on chain.
Broadcasting adds a further disclosure
Submitting a transaction sends it to the provider first, so the provider sees it before the network does and knows exactly who submitted it.
It also has the option not to relay, or to relay after a delay, which is a capability distinct from observation.
Wallets increasingly offer private submission routes for this reason, though those routes involve trusting a different party rather than no party.
Providers are concentrated
A small number of infrastructure companies serve a large share of wallet and application traffic, because operating reliable node infrastructure at scale is demanding.
That concentration means a substantial portion of activity is visible to few operators, which is a privacy characteristic and also an availability one.
Outages at a major provider make wallets appear broken even though the underlying networks continue producing blocks normally.
What reduces the exposure
Running a personal node removes the third party entirely, at the cost of hardware, bandwidth and maintenance that most users will not take on.
Light clients narrow the disclosure by verifying headers and requesting specific proofs rather than trusting a provider's answers wholesale.
Configuring different providers for different accounts breaks the association between them, which is a partial measure but a meaningful one for anyone maintaining separate identities on chain.
The provider setting is usually editable in wallet preferences, so the change requires no additional software. What it requires is knowing the default exists, which most users never learn.