Bitcoin Bearish Signal: Long-Term Holders Deposit To Exchanges

Keshav Verma

1 year ago

3 mins read

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On-chain data shows that Bitcoin long-term holders are making deposits to exchanges currently, something that could be bearish for the price.

Bitcoin Exchange Inflow CDD Has Spiked Recently

As explained by an analyst in a CryptoQuant Quicktake post, investors have been making deposits to spot exchanges recently. There are two relevant indicators here: the “exchange inflow” and the “exchange reserve.”

The former of these keeps track of the total amount of Bitcoin that the holders are transferring to centralized exchanges, while the latter one measures the total amount sitting in the wallets of these platforms.

When the value of the inflow metric spikes, it means that the investors are moving a large number of coins to the exchanges. As one of the main reasons why holders may make such transfers is for selling-related purposes, this kind of trend can be a sign that selling is occurring.

Since selling activity occurs on the spot exchanges, the quant has restricted the exchange inflow and reserve indicators to track only the data related to the spot platforms.

The analyst has also chosen another modifier on the exchange inflow: the “Coin Days Destroyed” (CDD). In simple terms, what the CDD checks for is the activity of dormant coins in the market.

Tokens that have been sitting in wallets for a long time accumulate a large number of “coin days” (where 1 coin day corresponds to 1 BTC staying still for 1 day) and when these coins finally move, the coin days are reset or “destroyed,” which is the number that the CDD measures. The exchange inflow CDD naturally only keeps track of the coin days being destroyed through transfers to exchanges.

Now, here are the charts that show the trends in the 7-day simple moving average (SMA) value of this Bitcoin indicator and the 14-day SMA exchange reserve:

Looks like both of these metrics have gone up in recent days | Source: CryptoQuant

From the first graph, it’s visible that the Bitcoin exchange inflow CDD has registered a sharp spike recently. This would suggest that a potentially large number of dormant coins have been moved into these platforms.

Usually, the CDD having large values like these can be a sign that the “long-term holders” (LTHs) are on the move. The LTHs (defined as holders carrying their coins since at least six months ago) are the most resolute bunch in the market, so their depositing to exchanges can be something to watch for, as it implies that the market has made even these diamond hands waver.

As is visible from the second chart, the exchange reserve has also gone up alongside this spike in the exchange inflow CDD, suggesting that there haven’t been enough withdrawals to make up for these inflows.

It now remains to be seen what effect these possible selling moves from the LTHs may have on the Bitcoin price in the coming days.

BTC Price

Bitcoin has continued its stagnant price action recently as its price is still trading around the $26,400 mark.

BTC has continued to display boring price action in the last few days | Source: BTCUSD on TradingView

Featured image from Shutterstock.com, charts from TradingView.com, CryptoQuant.com

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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