Exchange Netflow Registers Negative Spike
On-chain data shows that Bitcoin exchange network flow has seen a negative spike recently, a sign that could be bullish for the price.
Bitcoin Exchange Netflow has dropped in recent days
As pointed out by an analyst in a CryptoQuant post, a large negative spike in netflow occurred yesterday. The “exchange netflow” is an indicator that measures the net amount of Bitcoin that is entering or leaving the wallets of all centralized exchanges. Its value is naturally calculated as inputs minus outputs.
When the value of this metric is positive, it means that a net amount of BTC is currently entering the wallets of these platforms. As one of the main reasons why investors deposit their coins on exchanges is for selling related purposes, this type of trend can have downward implications on asset value.
On the other hand, negative values of the indicator imply that the outputs are currently outperforming the inputs. Such a trend, when prolonged, could be a sign of accumulation by holders and therefore could be bullish for the cryptocurrency price.
Now, here is a graph that shows the trend of Bitcoin exchange network flow over the last few months:
The value of the metric seems to have been quite negative in recent days | Source: CryptoQuant
As shown in the chart above, Bitcoin exchange network flow has seen a huge negative spike recently. This means that investors have withdrawn a large number of coins from these platforms.
Some large negative spikes were also seen earlier in the month. The first of these occurred right after the asset price had dropped below the $28,000 level, while the second occurred when the coin was hovering around the $27,000 mark.
Both peaks could have been signs of some whales trying to reach the bottom during the decline. The latest dip in the indicator also came after the cryptocurrency plummeted; this time to the $26,000 level.
This new spike in net outflows is the second largest the indicator has seen this year, with only withdrawals during the consolidation around the $27,000 level being larger in scale.
Naturally, even if these exits are a sign of buying pressure in the market, they are unlikely to be able to reverse price on their own; just like the previous two peaks also failed.
However, it is a positive sign for the cryptocurrency as it shows that at least some whales think the asset is worth buying at current prices. While perhaps not immediately, this can certainly help the price bottom out eventually.
quant also noted that Bitcoin’s daily Relative Strength Index (RSI) has also formed a possible bullish divergence recently, which could also be another factor to consider.
Looks like the price and the RSI have gone opposite ways recently | Source: CryptoQuant
BTC price
At the time of writing, Bitcoin is trading around $26,800, up 1% over the past week.
BTC has been consolidating recently | Source: BTCUSD on TradingView
Featured Image from iStock.com, Charts from TradingView.com, CryptoQuant.com