On-chain data shows Bitcoin Interexchange Flow Pulse will see a trend reversal, this means the price of the crypto.
Interexchange Bitcoin Flow Pulse Crosses 90-Day MA
According to CryptoQuant’s year-end dashboard release, trend changes in this metric have historically occurred with phase changes in the market. “Interexchange Flow Pulse” is an indicator that measures the 1-year cumulative net flow between Coinbase and derivatives exchanges.
When the value of this metric increases, it means that investors are transferring more coins from the spot to the current derivatives exchange, and are therefore willing to take more risks. On the other hand, low values indicate that not much capital is flowing into the current derivatives exchange.
Now, here’s a chart showing the trend in the Bitcoin Interexchange Flow Pulse, as well as the 90-day moving average (MA), over the past few years:
Looks like the value of the metric may be beginning to turn around | Source: CryptoQuant
As you can see in the chart above, the pattern appears historically with the Bitcoin Interexchange Flow Pulse during the bull-bear trend in crypto prices. Whenever the coin has observed a bullish period, the indicator has seen a constant climb and has remained above its 90-day MA.
The reason behind this is that investors are generally willing to take on more risk during bull markets, and therefore send more amounts to derivatives exchanges to set up leveraged positions.
However, each metric has reversed direction and crossed below the 90-day MA, the top order has occurred in BTC price, and the bullish trend has ended. In the bear market that has followed this period, the Interexchange Flow Pulse has typically continued to decline and remain below its 3-month average. Once again, why this happened is simple; a bear market is when the average holder is unwilling to take risk, so the flow of capital into derivatives dries up.
This trend in the indicator continues until the turning point once again, where the price bottoms out and the metric begins to advance again (crossing above the 90-day MA in the process).
In today’s bear market as well, the Bitcoin Interexchange Flow Pulse is steadily declining while remaining at the 90-day MA. However, most recently, the decline seems to have stopped, and now the indicator is testing the long-term average.
If historical patterns are anything to go by, a successful crossover and reversal in the trajectory of the Interexchange Flow Pulse here will mean a bear bottom for the current cycle, and a slow transition to a bull market may follow.
The price of BTC
At the time of writing, the price of Bitcoin is floating around $16,600, down 1% over the past week.
The value of the crypto seems to have declined over the last couple of days | Source: BTCUSD on TradingView
Featured images from Maxim Hopman on Unsplash.com, charts from TradingView.com, CryptoQuant.com