Recent on-chain data indicates that the trend of Bitcoin exchange inflow has reached its lowest point in almost a decade, a potentially bullish sign for the asset.
Inflows into Bitcoin Exchanges Have Been Declining Lately
As highlighted by CryptoQuant author Axel Adler Jr in a post on X, there has been a sustained decline in Bitcoin exchange inflows, reaching levels not seen in nearly a decade. The term "exchange inflow" refers to the total amount of Bitcoin deposited by investors into wallets associated with centralized exchanges.
When the exchange inflow metric is high, it suggests that a significant number of holders are depositing coins onto these platforms, often indicative of selling intentions, which can be bearish for the asset. Conversely, a low exchange inflow indicates fewer deposits being received by exchanges. Depending on the trend in the opposite metric, exchange outflow, this trend can be considered bullish or neutral for the cryptocurrency's price.
The analyst also includes data for the indicator's 365-day moving average (MA) on the same chart. Since February 2018, this line has steadily declined from 90,000 BTC to 36,000 BTC today.
The decrease in exchange inflows could imply a reduced appetite for selling Bitcoin. Consequently, according to supply-demand dynamics, this pattern could naturally contribute to a bullish effect on the price.
However, another explanation for this long-term trend could be the evolving role of exchanges in the market. During the 2017 cycle, exchanges played a significant role, receiving substantial deposits. However, in the 2021 cycle, alternative investment avenues for Bitcoin emerged, potentially explaining the drop-off between the two periods.
Presently, Bitcoin is experiencing an era where spot exchange-traded funds (ETFs) have gained regulatory approval and are witnessing significant demand. With the rise of these ETFs, cryptocurrency exchanges may have lost some relevance, contributing to the expectation of even fewer deposits in this cycle compared to the 2021 epoch.
May 2024, Cryptoniteuae