Todays metric I learned from one of the OG’s of crypto, Willy Woo. It’s another great indicator of where we currently are in the market cycle.
In previous newsletters we spoke about inflows and outflows of Bitcoin onto exchanges. When a holder moves Bitcoin onto an exchange or moves it off an exchange into cold storage that gives us an idea of their intent with that Bitcoin. Moving it off an exchange is an action that signals they want to hold it and moving it onto an exchange is an action that signals they may want to sell.
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Analyzing the actual amount of Bitcoin on exchanges can be looked at in different ways when determining where we are in the market cycle. When large Bitcoin whales and institutions buy Bitcoin, they tend to move them off an exchange and into cold storage. They’re more sophisticated investors and understand the important of cold storage to protect their massive holdings.
However, retail investors tend to be less sophisticated and keep their Bitcoin holdings on the exchange they bought them. Also, large whales and institutions tend to be the first buyers of the market cycle while retail tend to come in after, while the hype of Bitcoin starts to boom.
That creates two distinct phases of a Bitcoin market cycle; the accumulation phase when large whales and institutions accumulate Bitcoin in anticipation of the next uptrend and the main phase when retail investors start to buy Bitcoin.
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So, we know that whales and institutions buy first and move their holdings off exchanges. Also, we know that retail buy after and keep their Bitcoin on exchanges.
Above is a chart of the Bitcoin balance on exchanges. The two red arrows point to a period when retail buying begins. How do we know that?
Right before the red arrows you can see a downtrend in Bitcoin inventory on exchanges. That signals the accumulation phase of whales and institutions buying and moving their Bitcoin off exchanges. The red arrows point to a period when it levels off and flattens. That signals the start of retail starting to buy and keeping their Bitcoin on exchanges.
Check out what happens after the first red arrow to the Bitcoin price. It starts to go parabolic while inventory on exchanges also increases significantly. That is retail flooding into the market trying not to miss out. This is the last phase of the bull market that pushes prices to levels we didn’t think possible.
We just started it. Stay safe friends.
Let’s connect on Twitter. Looking forward to hearing your thoughts and feedback.
In the news…
Resources I Use
I use Glassnode for all the metrics I track on the Bitcoin network. Their platform is extremely user friendly and fun to use.
Binance is the main exchange to trade the crypto markets.
Coinsquare offers Bitcoin trading in Canadian dollars and is one of the top exchanges in Canada.
Trading Alpha has built their own indicators that provide buy and sell signals for crypto and equities trading.
I use Tradingview daily to analyze trading charts and find areas of support and resistance.
I learned how to trade through the Bulls on Wall Street program. I’m in this chat everyday giving out my trade ideas.
Nothing in this article is investment advice. I’m not a financial advisor. Do not make investment decisions based on what is in this article or any other article written by BTC News or Blockedia.