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Over the last year, a certain component has become implanted in the speculator’s psyche while studying any Bitcoin or Altcoin statistic chart. They jump into assumptions with a pre-existing bias. As a result, they can only perceive one direction: bullish or bearish. For them, it’s either black or white, though there may be some grey regions.
Such an approach has harmed the exchange inflows/outflows statistic. An analyst would take a fast peek and determine if the market is bullish or bearish. While a powerful indication in its own right, we will strive to ignore bias in this post in order to establish its significance in the present market.
Bitcoin Inflows/Outflows: where do we stand right now?
Data over the last three days indicate that exchange nett flows have remained negative. Over the weekend, around 28k BTC left the market, with selling pressure likely to ease. With Bitcoin consolidating below $40,000, a bullish bias has crept into the scenario, with many implying that this is a strong accumulating period.
It is right logically, but we will now provide an other point of view that eliminates directional mitigation.
When the long-term Bitcoin supply on exchanges is examined, it is shown to be considerably larger than the annual average. It is not as low as it was on January 2nd, but it is also greater than the supply saw on April 21st. The argument now is that mass accumulation is going place right now. Kraken had a 16k Bitcoin departure, which may imply such, but Kraken isn’t an exchange where traders would go to collect Bitcoin.
This is when the liquidity story comes into play. Although Bitcoin may depart on these platforms, traders and institutions will not rely on them since big outflows will not equal liquidity.
In terms of liquidity, the top three exchanges are Bitfinex, Coinbase, and Binance, where trader accumulation is often expected. The charts below will provide more clarification.
The netflow of Bitcoin on Binance remains quite typical, with outflows holding only a small edge at the moment. Similarly, Bitfinex’s supply reserve has not fallen much, implying that selling pressure on this platform is not as low as it appears.
Are we seeking for a definitive answer?
The answer is that there isn’t one. The fact that each exchange has a NetFlow that is distinct from the others suggested that there is probably reshuffling going on rather than accumulation. Depending on the price movement, the decreasing selling pressure might be just brief.
At the time of publication, Inflows actually outnumber Outflows, implying that the accumulation angle isn’t as dependable. However, the purpose of this story is not to dismiss the significance of inflows and outflows. The likelihood of Bitcoin rising higher from its present price position remains strong.
The important point is that maintaining a directional bias in bumpy markets is not good. A little bit of contrarian analysis might also help.