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Exchange Net flow shows that Bitcoin could be rising again

Photo of: Joseph Stone
by Joseph Stone

Is Bitcoin on its way up again? This is what this technical indicator suggests. It is an analysis of the net flow of BTC in and out of the exchanges.

For the past few days, the trend of this flow has been negative. This means that more bitcoin is leaving the exchanges than it is coming in. Now if people want to sell, they will deposit their BTC. Conversely, when people HODL, then they withdraw their crypto-currencies and put them in their wallets.

The Exchange Net flow indicator is available on the CryptoQuant website. It analyzes the amount of Bitcoin flowing in and out of the exchanges. Here is how this indicator is calculated:

Exchange Net Flow = BTC Inflow – BTC Outflow

If the outflows are greater than the inflows, then the indicator is negative. This has been the case since about June 15. If the Exchange Net Flow oscillates between positive and negative during the range periods, the trend seems to be confirmed as it has been in the negative zone for 25 days now.

When we look at this indicator, we can see that the negative periods are linked to periods of buying Bitcoin. This was for example the case at the beginning of the year when the market was in an accumulation phase. What followed was a bull run of several months that propelled BTC from $9,000 to $63,000. This bullish phase was then followed by hesitation, during which the Netflow alternated between a positive and negative value.

This period of uncertainty corresponds to the time when the Bitcoin price marked the highest points, momentum where the number of sellers was equivalent to the number of buyers. As buying and selling were at the same level, the price stagnated. That’s how the highs are created. Then the crash of May 2021 saw the Netflow go into clear positive values, a characteristic sign of a decline. And the decline was violent, to say the least, as the whole market lost between 50 and 70%.

Now the price seems to have stabilized around the technical level of 30,000 dollars. At this price, no one seems to be selling anymore. Indeed, on every occasion when the price has fallen below 30,000, there have been violent buybacks. The market seems to have found its support for this correction, and a return of the bull run is possible.

In addition, the Chinese mining ban is decentralizing the blockchain. These facilities are migrating to greener mining centers which could soon reconcile Tesla to digital currency. Finally, more and more institutions are joining the movement, as in Argentina, where a bill has been introduced to allow payment in bitcoin.

However, this indicator alone is not enough to say that the market will pick up again. If this is a positive point, we must wait for further confirmation. Especially since this indicator was negative a few days before the May crash.

The technical analysis of this pivot point will be crucial in the coming days. If Bitcoin manages to regain the $41,000 level, the bullish trend will be confirmed. On the other hand, if it falls below the 30,000 marks, the downtrend could take hold for good.