Bitcoin Outflows Show Huge Spike, Whales On Shopping Spree?
On-chain data shows that exchanges have seen a large Bitcoin outflow recently, a sign that whales may be buying the asset.
Bitcoin exchange network flows have been negative in recent days
An analyst in a CryptoQuant post pointed out that around 10,000 BTC left exchanges yesterday. The relevant indicator here is the “all-exchange net flow”, which measures the net amount of Bitcoin flowing into or out of the wallets of all centralized exchanges. The metric value is calculated by dividing the inputs and outputs.
When the indicator registers a positive value, the inflows are more significant than the outflows and a net amount of BTC is entering the exchanges. If these deposits are going to spot exchanges, BTC could experience a negative impact as investors often use these platforms for selling purposes.
On the other hand, net flow with a negative value suggests that holders are currently withdrawing a net number of coins. This trend could be a sign that investors are hoarding the cryptocurrency and are bullish on the asset’s value.
Now, here’s a graph that shows the trend in net flow from all Bitcoin exchanges over the last few months:
Looks like the value of the metric has been quite negative during the past day or so | Source: CryptoQuant
The chart above shows that Bitcoin exchange network flow saw a huge negative spike yesterday. Investors withdrew a net amount of 10,000 BTC corresponding to this spike.
However, it is not clear whether these withdrawals were a sign of new purchases by the whales. It is because investors use spot exchanges for activities related to buying. Still, the net flow indicator used here includes data for both spot and derivatives exchanges; the outputs of the latter would not necessarily imply accumulation.
One metric that can provide clues as to where these outflows are coming from is “open interest,” which measures the total amount of futures contracts currently open on derivatives exchanges. The chart below shows how Bitcoin’s open interest value has changed recently.
The value of the metric seems to have been mostly flat in recent days | Source: CryptoQuant
The graph shows that Bitcoin’s open interest has not seen a drop over the past day, while all netflow exchanges have seen a huge negative spike simultaneously. Instead, open interest increased slightly during this period.
If yesterday’s outflows were coming from derivatives exchanges, open interest would have dropped as investors would have closed some contracts to withdraw the coins. As this was not the case, it seems reasonable to assume that the withdrawals were from spot platforms.
If the large negative spike in network flow was a sign that some whales were buying the cryptocurrency, the BTC price could take a bullish hit.
BTC price
At the time of writing, Bitcoin is trading around $21,000, down 10% over the last week.
BTC has plunged during the last 24 hours | Source: BTCUSD on TradingView
Featured Image by Todd Cravens at Unsplash.com, Charts by TradingView.com, CryptoQuant.com