Bitcoin Outflows From Coinbase Surge, Possible Bullish Signal

Recently, on-chain data shows Bitcoin outflows from the major cryptocurrency exchange Coinbase have surged dramatically. This sharp outflow increase is a bullish signal for Bitcoin’s price outlook. An analyst pointed out this surge in outflows in a CryptoQuant Quicktake post published earlier this week. The analyst noted that investors have seen huge demand for Bitcoin lately.

The relevant metric being tracked here is called the “exchange outflow.” This metric keeps track of the total amount of Bitcoin moving out of the digital wallets controlled by centralized cryptocurrency exchanges like Coinbase. When the value of this metric shows a high reading, it indicates that investors are currently withdrawing a significant number of bitcoins from the exchange platform.

Generally, cryptocurrency holders take their coins out of the custody of exchanges when they plan to hold onto them for an extended period. Thus, periods of large outflows of Bitcoin from exchanges can have a bullish impact on the cryptocurrency’s price trajectory, at least in the longer term. On the other hand, if the exchange outflow metric shows low values, it implies that investors are making few withdrawals right now.

Depending on the trend with the inflow metric (which measures deposits to exchanges, potentially for selling purposes), an extended period of low outflows could be interpreted as either a neutral or even bearish sign for Bitcoin’s price.

Institutional Bitcoin Accumulation: Coinbase Outflow Spikes

Looking at some of the data, a chart shows that the Bitcoin exchange outflow from Coinbase has witnessed a huge spike over the last couple of weeks. One particularly massive spike in this indicator occurred just before Bitcoin’s price started rallying toward the $50,000 level.

Coinbase is known to be the preferred cryptocurrency exchange platform for many of the largest institutional investors in the U.S., so movements related to this exchange can provide hints about the behavior currently being exhibited by these powerful “whale” players.

The timing and sheer scale of this recent spike in outflows from Coinbase implies that these massive institutional entities may have participated in a large new round of Bitcoin accumulation and buying. And given that the Bitcoin price rose sharply shortly after these withdrawals, this wave of outflows likely led to significant fresh buying demand from the whales.

The value of the indicator appears to have been quite high in recent days | Source: CryptoQuant

Even after Bitcoin’s price rallies toward the $50,000 level, the exchange outflow data from Coinbase has continued to show intermittent withdrawal spikes. However, these spikes have been measurably smaller than the humongous initial withdrawal spree preceding the rally. The CryptoQuant analyst notes in their post: “What can we observe here? There is a huge demand, especially today. Remember, they want your Bitcoins. Don’t give in to FOMO, and make sure you have strong hands.”

The outflow chart also reveals that Bitcoin’s rally from below $43,000 to around $48,000 earlier this month occurred roughly when Coinbase saw consistent outflows of coins. However, when those withdrawals dropped to lower levels again, Bitcoin hit a short phase of more sideways price movement before the most recent surge.

Monitoring Coinbase Outflow for Bitcoin Trends

Monitoring the Coinbase outflow indicator in the coming days and weeks might provide an advance signal about potential cooldowns or pauses in Bitcoin’s bullish upward momentum, at least in the shorter term. Bitcoin pushed above the psychologically significant $50,000 price level earlier this week. Still, the leading cryptocurrency has seen some moderate pullback since then, now trading back at around the $49,600 price level at the time of writing.

Source: TradingView

Furthermore, the author’s views are for reference only and shall not constitute investment advice. Before purchasing, please ensure you fully understand and assess the products and associated risks.