CryptoQuant CEO Ki Young Ju recently tweeted his thoughts on increased netflow to bitcoin exchanges. According to Young Ju, the market may confront three potential scenarios, each of which will have a different impact on the Bitcoin and altcoin markets.
heightened selling pressure
The first scenario that will occur as a result of increasing exchange inflows will result in greater market selling pressure. Because traders and investors are transferring cash to exchanges, the primary reason should be to profit or de-risk their portfolio. Price reductions may occur as a result of increased selling pressure. Previously, several analysts and data indicated that the present bull trend is not being supported by the derivatives market.
Selling pressure, along with a lack of purchasing power, may result in much higher volatility, which may not favor bulls.
BTC volatility has grown overall.
Large funds inflows to exchanges do not always imply that all of them will be sold right away. According to the CEO of CryptoQuant, Bitcoin is frequently used as collateral, and larger net flow could signal increased derivatives funding, something the current bull run needed.
Volumes in both futures and options contracts are lower than they were in April. The large-scale funding of derivatives provides clues regarding the current market’s nature. Because private traders can conduct trades with substantial amounts that they do not own in a highly leveraged market, volatility rises.
The most beneficial result of increasing exchange netflow is the sale of Bitcoin in favor of altcoins. While profit means that investors will sell their Bitcoins in favor of stable coins, alt season suggests that holders are shifting their assets to acquire various altcoins like Cardano, which look much more promising in terms of recent price activity.