MCS | The Correlation Between Bitcoin (BTC) Liquidity And The Price

MCS | The Correlation Between Bitcoin (BTC) Liquidity And The Price

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There are several models that predict the direction of the Bitcoin (BTC) price. Today, among the many metrics provided by cryptoquant.com, let's look at three of the most used to predict the direction of Bitcoin prices in the future.

1. The Inflows and the Outflows of Bitcoin (BTC) wallets of major exchanges

Source: Cryptoquant.com
Source: Cryptoquant.com

The inflow of Bitcoin (BTC) into the exchange wallet means that Bitcoins (BTC) are transferred from an external wallet to the exchange wallet, and the Bitcoin (BTC) flowing into the exchange usually means selling pressure. In other words, as the inflow of Bitcoin to the exchange increases, the sale volume increases, and it is seen as one of the signs of price decline.

On the other hand, the outflow of Bitcoin (BTC) from the exchange to an external wallet means a decrease in selling volume, that is, a decrease in selling pressure. In particular, in the case of the recent outflow of Bitcoin (BTC) from Coinbase, it is often seen as a strong signal of a rise in the price of Bitcoin (BTC) as it often can lead to mass purchases of external institutions (such as Tesla) through OTC transactions.

2. The number of TX of all stablecoins deposited on the exchange

Source: Cryptoquant.com

There are various stablecoins such as USD-pegged USDT and USDC that are pegged to various currencies. The increase in deposit transactions that the stablecoins flow into the exchange is equivalent to the increase in currencies where you can purchase cryptocurrencies traded on the exchange. This also raises expectations for buying and can be seen as a signal of the rise of Bitcoin (BTC) price. Mainly when price adjustments occur, the number of stablecoins deposits increases, which seems to reflect the sentiment of investors trying to buy from the bottom.

3. Coinbase Premium Index

Source: Cryptoquant.com

The Coinbase Premium Index is an index of the price difference between the BTCUSD pair of Coinbase, the largest cryptocurrency exchange in the United States, and the BTCUSDT pair of Binance. Coinbase is used by many institutional investors because it allows the direct purchase of Bitcoin (BTC) with US dollars (USD). If they buy in bulk in US dollars (USD), the difference between the BTCUSD of Coinbase and the BTCUSDT of Binance will widen.

After Tesla's Bitcoin buy signal, Coinbase whales continued to buy Bitcoin (BTC), and the Coinbase premium over Binance at one time exceeded $400 per BTC. Normally, if there is a premium of $50 or more on the price of Bitcoin (BTC) in Coinbase, it can be translated that Coinbase whales are buying Bitcoins.

In this post, we learned about the three metrics of Cryptoquant.com that can help traders to predict the direction of the Bitcoin (BTC) price.

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