What can the withdrawal of a large number of bitcoins from the exchange indicate?

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Over the past day, 38.2 thousand bitcoins worth about $ 2.3 billion were withdrawn from the Binance crypto exchange. Often, the outflow of funds from trading floors is associated with active purchases. For example, the largest Bitcoin withdrawal in a year was recorded after the price of the coin fell by a third per day on May 19, to $ 30 thousand, writes RBC Crypto.

Lower risks of panic sales

The volume of withdrawal of cryptocurrencies from exchanges is an important metric that is worth paying attention to, said Nikita Soshnikov, director of the Alfacash cryptocurrency exchange service. Crypto exchanges are platforms where traders perform transactions with digital assets. The more coins there are on crypto exchanges, the higher the trading volumes in the future.

“The withdrawal of a large volume of coins from crypto-exchanges suggests that at the moment the owners of the assets do not plan to conduct any trading operations with them. The active withdrawal of digital assets from crypto-exchanges may also indicate that at the moment many members of the crypto community see long-term prospects for the growth of the rate of cryptocurrencies. Otherwise, they would have left the coins on the platform in order to be able to quickly sell them, ”Soshnikov explained.

According to him, the drop in the number of coins on trading platforms, among other things, reduces the risks of panic sales (due to the fact that there are simply not so many coins on the sites, the sale of which could negatively affect the asset price). Usually, investors withdraw cryptocurrency from exchanges in order to organize its safe storage, the expert explained. For this, for example, so-called “cold” wallets can be used.

Possible transition of bitcoin to flat

There is a strong opinion that it is worth keeping a cryptocurrency on an exchange only when you are actively trading, reminded Pavel Shkitin, CEO of the Nominex cryptocurrency exchange. Thus, large withdrawals from exchanges may mean that investors are not going to trade this currency anytime soon. In this case, possible scenarios for the suspension of active trading: investing in an asset for a long time or waiting for price fluctuations that are not interesting for trading (flat).

“Many market participants look positively at the further behavior of the bitcoin price, opinions are being replicated that this year we will see $ 80 thousand, and maybe $ 100 thousand for one bitcoin. But very often such publicly spoken words are not backed up by personal investment. Therefore, most likely, the current large volumes of Bitcoin withdrawals from exchanges are associated with its possible transition to flat, “the expert suggested.

Signal for regulatory action

It will be useful to monitor the outflow of funds in large volumes from crypto-exchanges, since this may indicate the following: institutional investors are withdrawing currency for long-term storage, said Artem Deev, head of the analytical department at AMarkets. He added that this usually leads to an increase in the value of bitcoin and other currencies, as the number of coins on the market decreases.

This may also be a signal for some kind of regulatory action on the part of the authorities of different countries, so it will be correct to monitor the outflow of funds by country (when possible), the specialist emphasized. Institutional investors, by their behavior, may hint at increased government pressure on the crypto market, and on the other hand, the outflow of funds can stimulate the growth of the exchange rate in the short term, the expert concluded.

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