An analysis of Bitcoin and Ethereum transaction flows reveals opposite moves for the top two tokens, with the market leaders establishing a clear edge when it comes to long-term holdings.
Exchange flow is the number of tokens deposited or withdrawn from the exchange wallet. A common on-chain metric for evaluating this is Exchange Net Position Change.
The influx into exchanges is generally viewed as bearish, as the primary reason for moving tokens to exchanges is to sell them. In contrast, exchange outflows are generally viewed as bullish, as token withdrawals are typically intended for long-term holding.
By examining the flow of tokens in and out of exchanges, we can determine bearish or bullish investor sentiment.
Bitcoin exchange net position fluctuation
Bitcoin bottomed out at $17,600 on June 18, following a sharp price drop from the Terra scandal and subsequent industry-wide deleveraging. The chart below shows consistent exchange BTC outflows since bottoming out, with daily outflows averaging over $1 billion per day.
Even though Bitcoin fell to $20,800 on August 19, the currency outflow rate rose significantly last week. This suggests that investors see value in the current price range.
The FTX exchange accounted for more than half of all outflows last week. There is no apparent underlying reason for this occurrence. However, on August 20th, according to the “leaked document”, FTX increased revenue by more than 1,000%, from $90 million in 2020 to $1 billion in 2021.
Further analysis of FTX’s BTC reserves reveals a significant reduction in holdings. In March, the company held over 120,000 BTC. But now, halfway through the third quarter, this dropped to just 13,000 tokens, with the period from June showing the steepest drop, leading to a gradual drop in BTC holdings.
Ethereum exchange net position change
In contrast, changes in Ethereum’s net position show that the amount of tokens leaving the exchange has returned to near net zero despite massive outflows since mid-March.
This development is a negative sign, especially as the merger approaches. This suggests that investors view the switch to Proof of Stake (PoS) as a “buy the rumor, sell the news” event.
The contrasting activity of Bitcoin and Ethereum may indicate that investors see Bitcoin, not Ethereum, as a long-term play against macro developments such as inflation and escalating geopolitical tensions. I have.