According to Glassnode’s August 2nd newsletter, this week has seen an extremely large volume of Bitcoin leave centralized exchanges, with the rate accelerating to over 100,000 BTC per month for the third time since September 2019. With Bitcoin’s current market price at $38,500, this means that a total of $3.85 billion worth of BTC are leaving centralized exchanges monthly.
The exchange net position change metric is an on-chain analytic metric used to map out the monthly rate of coins flowing in (green) or out (red) of all exchanges. The Bitcoin exchange net position change is used to measure the demand and supply of Bitcoin going in and out of centralized exchanges. If Bitcoin leaves centralized exchanges, it means there is an accumulation (Demand) of the flagship cryptocurrency but when there is more Bitcoin on centralized exchanges, it means there is a low demand for the coin.
Outflows had previously surged to nearly 150,000 BTC monthly at the end of April 2020 following the violent “Black Thursday” crash after former U.S President Donald Trump announced a travel ban between Europe and the U.S. in March as the coronavirus pandemic intensified. Outflows again came close to 150,000 BTC monthly in November 2020 as Bitcoin surged to test its then-record price high of $20,000, with BTC rallying into new all-time highs the following months. This newfound accumulation, if it continues its trend could see another bull run that could push the price of Bitcoin above its news all-time high.
Also according to Glassnode’s newsletter, in terms of the aggregate balance still held on centralized exchanges, holdings have now returned to the 2021 lows of 13.2% of circulating supply which represents a near full retracement of the significant inflow volume observed during the May 2021 sell-off that saw Bitcoin lose almost half its value.
The report also noted an interesting interplay between Coinbase and Binance, the two largest exchanges by balance. Coinbase saw significant outflows throughout most of 2021, whilst Binance was the largest recipient.
According to the chart, the trend for Binance appears to have stalled and started to reverse, with a total outflow of approximately 37.5k BTC this week. Coinbase balances increased in July, with a large deposit of around 30k BTC in mid-July, and this week an outflow of 31k BTC. This has largely unwound all inflows since mid-May. Overall, this may well be the start of another era of net exchange outflows and is a trend to watch.
The report also noted that transaction volumes are spiking higher, up 94% from the lows of $4.7B/day, to around $9.1B/day this week. This indicates that there is increased demand for the flagship cryptocurrency and this trend is likely to continue if there is no significant regulatory FUD (Fear Uncertainty and Doubt) news to change investor sentiments.
Investors are reminded that cryptocurrency assets are very volatile and the dollar-cost averaging technique is the advised approach before investing into any cryptocurrency project.