Bitcoin Records Highest Exchange Outflow as Investor Confidence Returns
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According to on-chain data, the supply of Bitcoin (BTC) on exchanges has seen a significant increase in outflow, with reports showing that this is the most notable spike to occur since the November collapse of the crypto exchange FTX. According to an analyst at CryptoQuant, around 7,000 coins have left the exchange during this latest spike.
The key indicator to pay attention to is the “all exchanges netflow,” which calculates the net amount of Bitcoin that is entering or exiting the wallets of centralized exchanges. The value of this metric is determined by the difference between inflows (coins going in) and outflows (coins moving out).
When the indicator has a positive value, it implies that inflows are greater than outflows and more coins are being deposited into exchanges. This trend can be interpreted as bearish for the price of the cryptocurrency, as it suggests that investors are likely looking to sell their coins.
On the other hand, negative values imply that a net amount of supply is being withdrawn from these platforms. This can signal that investors are accumulating coins, which can be interpreted as bullish for the price.
FTX Collapse Caused Panic in Bitcoin Investors
The chart from CryptoQuant shows that the outflow values were substantial after the collapse of FTX. This is likely due to the fact that the collapse of a well-known exchange like FTX instilled fear among investors, making them more aware of the risks of keeping their coins on centralized platforms. As a result, many holders withdrew their coins from exchanges and stored them in offsite wallets with the keys they owned, causing the netflow to plunge into negative values.
Interestingly, the latest negative netflow spike was recorded while Bitcoin has been observing a sharp rally. Typically, inflows are more commonly seen during such periods as investors rush to take some profits.
It is important to note that this outflow of coins from centralized exchanges does not necessarily imply a bearish trend for the price of Bitcoin, but rather reflects the investors’ preference to hold their coins in personal wallets instead of centralized exchanges.
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