BTC flows: how to use the indicator?
BTC flows on exchanges are one of the indicators of analysis of the main crypto.
The state of supply and demand is represented by Bitcoin flows (transfers from exchanges to wallets and vice versa). We've put together some information on how to use this data and where to access it:
BTC inflows on crypto exchanges
Technically, transferring bitcoins from wallets to centralized exchanges indicates that users are ready to sell the asset. As a result, it is more reasonable to enter short positions during significant BTC transfers to CEXs. However, major players do not always sell their bitcoins right away after the transfer. They are waiting for the best opportunity or price to begin selling.
It is important to differentiate transfers for sale and regular transfers between exchanges because the latter represents the shift of users' own reserves back and forth. Furthermore, some activities, like staking and exchange deposits, often lead to the BTC inflows, but these coins are not for sale.
BTC outflows from crypto exchanges
In contrast to inflows, BTC outflows from the exchange once it has been bought. This means that the majority of the news has already been priced in. However, substantial outflows from exchanges represent institutionalists' willingness to hold the asset. It has a positive influence on demand in the long run through a decrease in available supply.
A good supplementary indicator is the replenishment of exchanges with stablecoins or the issuance of additional stablecoins. What other option is there to issue conditional $1 billion USDT if not to purchase crypto?
Exchange balances
This indicator shows the amount of bitcoins that are currently held on crypto exchange hot wallets. The confidence of users grows more, and BTC overall liquidity improves when more BTC is on exchanges. The ability to control the price of an asset is directly impacted by liquidity. This means that studying BTC exchange balances is the best for forecasting future volatility rather than predicting price direction.
By the way, currently there are 2.4 million Bitcoins on centralized exchanges, the lowest level in the last four years. It is so due to the collapse of the FTX crypto exchange: users have less trust in centralized exchanges and prefer to keep funds in wallets.
Amount of BTC on centralized crypto exchanges (Glassnode)
The question is also where to get information about BTC transfers. A few well-known resources are listed below:
· Glassnode. The website analyzes a lot of data, including transfers of BTC, altcoins, stablecoins, transaction volumes and statistics, etc.;
· Whale-alert. It has its own website, Twitter and Telegram channel. Publish all transactions in a row;
· CryptoQuant. It provides on-chain data on activity in the BTC network.
