Analysis of Bitcoin and Ethereum exchange flows revealed opposing activity for the two major tokens, with the market leader establishing clear dominance in terms of long-term holdings.
Exchange flows are the number of tokens deposited or withdrawn into or out of an exchange wallet. A popular on-chain metric to gauge this is the change in net trade position.
Exchange entries are generally considered bearish because the main reason to move tokens to an exchange is to sell the token. On the other hand, forex outflows are generally considered bullish, as withdrawing tokens is usually for the purpose of holding them for the long term.
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Examining the flow of tokens into and out of exchanges helps determine bearish or bullish investor sentiment.
Bitcoin exchange net position change
Following steep price declines due to the Terra scandal and subsequent industry-wide deleveraging, Bitcoin bottomed on June 18 at $17,600. The chart below shows steady BTC outflows from the exchange since the bottom, with daily outflows exceeding $1 billion per day on average.
Over the past week, the exchange rate outflow has increased significantly, despite Bitcoin falling to $20,800 on August 19. This suggests that investors are seeing value in the current price range.
The FTX exchange accounted for more than half of total outflows last week. There are no obvious fundamental reasons for this occurrence. However, on August 20, “leaked documents” revealed that FTX had increased its revenue by more than 1,000%, from $90 million in 2020 to $1 billion in 2021.
Further analysis of FTX’s BTC reserves shows a significant decline in holdings. As of March, the company held over 120,000 BTC. But now, midway through Q3, that figure has fallen to just 13,000 tokens, with the period from June showing the steepest drop, leading to a gradual decline in BTC held.
Ethereum exchange net position change
In contrast, the change in Ethereum’s net position shows that despite massive outflows starting in mid-March, the amount of tokens leaving the exchanges has returned to close to net zero.
This development is a negative sign, especially as the Merger approaches. This suggests to investors that the move to proof-of-stake (PoS) is a “buy the rumour, sell the news” event.
The contrasting activity between Bitcoin and Ethereum may indicate that investors see BTC, not ETH, as the long-term game against macro developments, such as inflation or escalating geopolitical tensions.
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Bitcoin Exchange Outflows Surpass $1 Billion Daily, While Ethereum Sees Net Inflows
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