An Indicator Suggests a Bearish Turn for Bitcoin
An on-chain indicator called the “Inter-exchange Flow Pulse” (IFP) is showing signs that Bitcoin whales are shifting towards a risk-off mentality. The IFP tracks the flow of Bitcoin between spot and derivative exchanges. When the value of this metric rises, it indicates that more BTC is moving from spot to derivative platforms, suggesting that whales are taking higher-risk positions on the derivative exchanges.
Historically, an upward trend in the IFP has coincided with bull runs for Bitcoin. Conversely, a downward trend in the IFP suggests a decline in flows from spot to derivative exchanges, indicating that whales are reducing their risk appetite. Bearish periods for the cryptocurrency have typically aligned with this trend.
A Pattern of Risk Appetite and Market Trends
A chart displaying the Bitcoin IFP over the past few years shows a consistent downtrend from mid-2021 to the end of 2022, indicating that large investors were continuously reducing their risk as the market became bearish.
However, following the FTX collapse, risk appetite among whales began to return, and the IFP started to rise throughout 2023 as these entities increased their flows to derivative platforms. But recently, the metric has started to decline again, suggesting a potential turnaround.
The 90-day simple moving average (SMA) is used by CryptoQuant to define significant transitions in trend. Crosses above this line have signaled bull markets, while crosses below have indicated bearish trends. The current graph shows that the Bitcoin IFP is retesting this historically significant line.
Possible Implications for Bitcoin
A complete cross below the SMA does not necessarily mean an extended shift towards a bearish trend. In some cases, like in 2016, the bearish price action was temporary before the metric reversed back up. However, it could indicate at least a local top for Bitcoin based on historical patterns.
BTC Price
Bitcoin’s price has experienced significant growth recently, currently trading around $46,700 as anticipation for ETFs grows in the market.
Hot Take: Bitcoin Whales Showing Risk-Off Mentality
An on-chain indicator called the Inter-exchange Flow Pulse (IFP) is suggesting that Bitcoin whales are adopting a risk-off mentality. The IFP tracks BTC flows between spot and derivative exchanges, and when it increases, it indicates that whales are taking higher-risk positions on derivative platforms. This trend has historically coincided with bull runs for Bitcoin. However, a decline in the IFP suggests a decrease in risk appetite among whales, which typically aligns with bearish periods for the cryptocurrency. The current graph of the Bitcoin IFP shows signs of a potential turnaround, indicating a shift in market trends. While a complete cross below the 90-day SMA does not guarantee a prolonged bearish trend, it may signal at least a local top for Bitcoin based on historical patterns.