On-chain data shows that the flow of bitcoin from spot exchanges to derivatives exchanges is currently showing a trend that has historically been bullish for the price of the cryptocurrency.
Bitcoin spot flow to derivatives exchanges starts to decline sharply
As a CryptoQuant analyst points out mailBTC spot to derivatives flow could hint at a bullish outcome for the cryptocurrency.
“Flow of spot exchanges to derivatives exchanges” is an indicator that measures the total amount of bitcoins moving from spot wallets to derivatives wallets.
When the value of this indicator rises, it means that more coins are now transferred to derivatives exchanges from spot, as investors look for open futures positions.
In the past, the indicator value usually moved faster whenever the price of a cryptocurrency dropped significantly.
And now here’s a chart showing the trend of spot bitcoin to derivatives exchanges over the past few years:
The value of the metric seems to have been observing a sharp decrease in recent weeks | Source: CryptoQuant
As you can see in the chart above, the quantitative analysis has marked the relevant parts of the bitcoin spot trend towards derivatives flow.
It seems that whenever the indicator saw a sharp increase to high values, followed by a collapse, the value of the cryptocurrency began to rise.
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During 2018, 2020 and 2021, this pattern formed shortly after the price of the coin dropped sharply and bottomed out.
This trend may indicate that as bitcoin is bottoming out, whales are sending large amounts of crypto to derivatives exchanges to go long, which creates a big spike on the chart.
More recently, the value of the derivatives stream has risen sharply, and now it seems to be falling again.
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This could mean that the metric has started to form the same pattern again, and based on history, this could prove to be bullish for the price of the cryptocurrency, at least in the short term.
At the time of writing, the price of Bitcoin is hovering around $29.5k, up 1% from the last seven days. Over the past month, the cryptocurrency has lost 2% in price.
The chart below shows the price dynamics of the coin over the past five days.
Looks like the value of the crypto has been going down over the last few days | Source: BTCUSD on TradingView
Bitcoin seemed to be gaining momentum above the $30k level of late, but today the coin has fallen below the mark again.
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com
Credit : www.newsbtc.com