Home Latest Bitcoin outflows from centralized exchanges surge to 100K BTC monthly

Bitcoin outflows from centralized exchanges surge to 100K BTC monthly

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The volume of Bitcoins on the balances of cryptocurrency exchanges fell significantly last week. Bitcoin outflows from centralized exchanges exceeded 100,000 BTC in July, the highest level since November 2020.

This usually perceived as a signal for an increase in the price of a cryptocurrency; because, in fact, investors withdraw the cryptocurrency for long-term storage, which essentially reduces its turnover. However, the crypto market has experienced rapid growth over the past year and has expanded several times in scale; so relying on only one or two metrics in forecasts it rather ill-advised.

Previously, the logic behind the outflow of coins from exchanges was quite simple: the number of Bitcoins on trading platforms is falling because their owners are withdrawing their funds to cold wallets in anticipation of a sharp rise in the price of BTC in the future, and they do not want to store coins on exchanges. But this time it could be different. Many analysts believe there is more to the outflow than just a trigger for high bullish activity in the near term.

What will happen to the price of Bitcoin?

According to analysts, in the last four days of July, the balance of BTC on exchanges decreased by 4.1 percent from 2.587 to 2.48 million coins. The market reaction was positive; the Bitcoin price reacted with local growth.

But it’s not that simple. As cryptanalyst Willie Wu notes; “you cannot judge what is happening in the market by only one indicator in one plane”. For example, Kraken recently announced that a large outflow of coins from its reserves was the result of a routine procedure for reallocating funds to internal wallets. Accordingly, there was no talk of any withdrawal of funds by users for the sake of long-term storage of the cryptocurrency.

Kaiko analyst Clara Medalie said that not only the wallets of exchanges; but also the reserves of other cryptocurrency platforms can be “variables” in this equation. Including those that engaged in OTC trading, that is, they sell large volumes of cryptocurrencies outside of regular exchanges.

Accordingly, the analyst also does not undertake to assert for what purposes the cryptocurrency withdrawn. Although she admits the fact of a decrease in the supply of coins.

According to experts from Glassnode, over the past two weeks, the total amount of BTC belonging to holders of “different weight categories” has grown rapidly. However, there is an exception here: we are not talking about wallets with a balance of 100 to 1000 BTC. This means that the fall of Bitcoin to the level of 30 thousand dollars a few weeks ago met with aggressive tactics of accumulation of different market players – both large and relatively small.

Other assumptions

There is another suggestion made by Chainalysis analysts. In their opinion, the increase in churn may be associated with a change in priority exchanges for investors. Outflows from exchanges dominated by trading pairs to cryptocurrencies were significantly higher; than that of exchanges with trading pairs to real currencies and stablecoins.

Finally, the last factor is the stricter standards for confirming the identity of users of Binance; one of the largest cryptocurrency exchanges. Recall that on the eve of Binance significantly limited the amount of funds for withdrawal for those who have not yet gone through the KYC procedure on the company’s platform; that is, have not confirmed their own identity. There is an assumption among analysts that this tactic has caused a natural reaction to the withdrawal of coins on exchanges with more democratic requirements.

There is another suggestion made by Chainalysis analysts. In their opinion, the increase in churn may be associated with a change in priority exchanges for investors. Outflows from exchanges dominated by trading pairs to cryptocurrencies were significantly higher than that of exchanges with trading pairs to real currencies and stablecoins.

Finally, the last factor is the stricter standards for confirming the identity of users of Binance; one of the largest cryptocurrency exchanges. Recall that on the eve of Binance significantly limited the amount of funds for withdrawal for those who have not yet gone through the KYC procedure on the company’s platform; that is, have not confirmed their own identity. There is an assumption among analysts that this tactic has caused a natural reaction to the withdrawal of coins on exchanges with more democratic requirements.

Conclusion

There really can be many reasons for this situation. However, in any case, this does not change the essence: there are fewer Bitcoins, Ethers and other cryptocurrencies on exchanges; so in the future, users may feel the consequences of a reduction in the supply of cryptocurrency. It is not known what they will be and when they will occur; but the situation for the market will clearly be non-standard.

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