Bitcoin Exchange Netflow Has Turned Deep Red Recently

On-chain data suggests the Bitcoin whales could be accumulating the dip as spot exchanges have recently seen their largest withdrawal of 2024.

The price of Bitcoin has been on a rollercoaster ride in 2024, and the latest leg of the journey has seen the cryptocurrency take a sharp downturn. However, on-chain data suggests that some investors may be using this dip to add to their BTC holdings.

According to data from CryptoQuant, spot exchanges have recently seen their largest withdrawal of 2024. The exchange netflow metric, which tracks the net amount of Bitcoin moving into or out of the wallets attached to all centralized exchanges, has turned deeply negative over the past few days.

When the value of this metric is negative, it means that the outflows are overwhelming the inflows, and a net amount of Bitcoin is exiting the wallets of these platforms. This kind of trend could imply that investors are looking to hold onto their BTC for the long-term, which can naturally be bullish for the leading cryptocurrency.

On the other hand, the indicator being positive suggests that the holders are making net deposits to the exchanges. The exact implication of such a trend on the cryptocurrency depends on which type of exchange is receiving these deposits, spot or derivatives.

In the case of spot exchanges, inflows can be bearish for the price, as they suggest investors may be looking to sell. However, derivatives inflows aren’t so simple, but they do lead to higher volatility for the asset, as they imply that traders are looking to open more risk positions on the market.

Now, let's take a closer look at the exchange netflow metric, specifically for spot exchanges, since the beginning of the year.

As you can see, the exchange netflow for the spot exchanges has seen a massive negative spike during the latest downturn in the price, potentially suggesting that some large investors are accumulating.

In total, this net outflow spike has corresponded to more than 46,000 BTC leaving these platforms, which is equivalent to over $2.6 billion at the current exchange rate of the cryptocurrency.

Given the timing of the outflows, it’s possible that whales are banking on the price to go up from these latest lows as they are shifting their coins off into self-custody.

However, it’s important to note that on-chain analysis can sometimes be tricky, and this analysis is based on the assumption that the large outflows from the derivatives exchanges are being driven by whales shifting their coins to external wallets.

Another possibility is that these coins are being moved to over-the-counter desks or other types of non-exchange wallets. In any case, the net outflows from the derivatives exchanges do suggest that whales are looking to reduce their risk exposure.

But since these coins haven't gone into spot exchanges, these derivatives users could be planning to hold for an extended period, following in the lead of the spot whales.

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