On-chain data shows that the flow of bitcoin from spot exchanges to derivatives exchanges is currently charting a historically bullish trend for the cryptocurrency price.
The flow of bitcoin trading to derivatives begins to drop sharply
As pointed out by an analyst at CryptoQuant MailThe immediate flow of BTC into derivatives may indicate a bullish outcome for the cryptocurrency.
“Spot exchange for Derivatives exchange flow” is an indicator that measures the total amount of bitcoin that moves from spot wallets to derivative wallets.
When the value of this metric rises, it means that more coins are now being transferred to the derivatives exchanges than the spot as investors look to open futures positions.
In the past, the value of the index usually moved faster whenever the price of the cryptocurrency noticed a significant drop.
Now, here is a graph showing the trend in Bitcoin spot for derivatives exchanges flow 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, Quantum has identified relevant parts of the Bitcoin point trend for derivatives flow.
It seems that whenever the indicator notices a sharp increase in high values followed by a decrease, the value of the cryptocurrency begins to climb.
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During 2018, 2020 and 2021, this pattern formed shortly after the price of the coin fell sharply and reached the bottom.
This trend may show that as Bitcoin approaches the bottom, whales start sending large amounts of cryptocurrency to derivatives exchanges to open long positions, thus creating a significant rally on the chart.
Only recently, the value of the derivatives stream has risen sharply, and now appears to be declining again.
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This could mean that the scale is once again starting to form the same pattern, and if history is anything to go by, it could be bullish for the cryptocurrency price, at least in the short term.
At the time of writing this report, Bitcoin price It is floating around $29.5K, up 1% in the past seven days. Over the past month, the cryptocurrency has lost 2% of its value.
The chart below shows the currency price trend 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 appears to have gained some stability above the $30K level recently, but today the coin has slipped back below the level.
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com