Data on the Bitcoin chain shows that BTC outflows have been gradually declining recently, hinting that a crash could happen soon.
On-chain data shows BTC outflows continue to decline
As one analyst on Twitter, on-chain data reveals that Bitcoin’s outflows have gradually declined over the past month.
The relevant metric here is the BTC netflow. This indicator shows the net amount of coins leaving or entering the exchange wallets. Its value is calculated by making the difference between the inputs and the outputs.
When the netflow shows negative values, it means that the outputs dominate the inputs. This means that more Bitcoins are withdrawn from exchanges than the amount invested. Such sustained values have generally been bullish for the crypto.
Positive values, on the other hand, would imply an increase in the number of coins entering exchanges, as the entries show more strength than the exits. It may be bearish for the price of BTC.
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Now here is a chart that shows the evolution of the value of BTC net flows over the year:
BTC's outflows seem to be decreasing | Source: Glassnode
As the graph above shows, Bitcoin has seen significant outflows over the past couple of months, but lately they have started to slow down.
It appears that during the 2021 bull run, exits were seen for much of the time frame. Once the net flows started turning green (i.e. investors started sending their coins to the exchanges to sell them), the price crash happened.
If the outputs continue to decline as they currently are, the indicator could turn green again. This could lead to another collapse in prices soon.
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However, it should be noted that net flows also turned neutral at many points during the last bull run, but no major correction has taken place. It remains to be seen whether this time the indicator will turn positive or not.
As of this writing, the price of BTC is floating around $ 62,000, up 9% over the past seven days. Over the past month, the crypto has gained 31% in value.
The graph below shows the Bitcoin price trend over the past five days:
BTC's price shows a rather sideways movement over the last few days | Source: BTCUSD on TradingView
After a September filled with several crashes, Bitcoin has made great strides in this October as the crypto is now on the verge of reaching a new all-time high (ATH). It’s unclear where the coin might go next, but if the net flows start to turn positive, a crash could happen soon.
Featured image from Unsplash.com, charts from TradingView.com, Glassnode.com