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On-chain data shows that most of the Bitcoin exchange’s inflow is currently coming from investors holding their coins at a loss.
The volume of the inflow of the Bitcoin exchange is now trending towards losses
According to data from network analytics firm Glassnode, short-term holders are mainly contributing to this influx of losses. “Exchange Inflow” is an indicator that measures the total amount of Bitcoin that is currently flowing into the wallets of centralized exchanges.
Typically, investors deposit funds into these platforms whenever they want to sell, so a large amount of inflow could be a sign that there is a sell-off going on in the BTC market right now. On the other hand, low values of the metric mean that holders may not be in a lot of selling at the moment, which could be bullish for the price.
In the context of the current discussion, the exchange flow itself is irrelevant; a related metric called “profit/loss offset by exchange inflow volume”. As the name of this indicator already suggests, it tells us whether the exchanges are currently receiving inflows from profit or loss holders.
When this metric has a value greater than 1, it means that most of the inflow volume contains coins that their holders carried at a profit. Similarly, values below the threshold imply a preponderance of loss volume.
And now here’s a chart showing the bias in profit/loss of Bitcoin exchange inflows over the past few years:
The value of the metric seems to have dropped somewhat in recent days | Source: Glassnode on Twitter.
As shown in the chart above, the profit/loss offset of the Bitcoin exchange inflow volume has been above 1 for most of the ongoing rallies that started back in January of this year.
This suggests that most of the foreign exchange inflows during this period came from profit holders. This naturally makes sense, as any rally usually encourages a large number of holders to sell and take their profits.
However, there were a few exceptional cases. The first occurred in March when the price of the asset fell below the $20,000 level. Then the trend in the market shifted towards losing sales, which meant that some investors who were buying near the local top began to capitulate.
A similar pattern occurred recently when the price of the cryptocurrency fell below the $27,000 level. After this fall, the indicator value dropped to 0.70.
Additional data from Glassnode shows that long-term holder (LTH) bias, investors who hold their coins at least 155 days ago, have actually been leaning towards profit lately.
Looks like the indicator is positive now | Source: Glassnode on Twitter.
The chart shows that the indicator has a value of 1.73 for LTH, which implies a strong bias towards profit. Naturally, if LTH was not sold at a loss, the opposite group should consist of short-term holders (STH).
This group seems to currently have a strong loss bias | Source: Glassnode on Twitter.
Interestingly, the value of the indicator for STG is 0.69, which is almost exactly the average for the market as a whole. This means that LTH has contributed relatively little to selling pressure lately.
The STH selling right now will be those who bought at or near the peak of the rally, and their capitulation could be a sign that these weak hands are currently being cleared from the market.
While the indicator has yet to drop as low as it did in March, this capitulation could be a sign that a local bottom for bitcoin could be close.
Bitcoin Price
At the time of writing, Bitcoin is trading around $26,400, down 1% from the last week.
BTC has been struggling lately | Source: BTCUSD on TradingView
