Bitcoin Flows Hint at Possible Bull Market in 2024

Bitcoin has been experiencing a volatile period since late 2023, with prices fluctuating between $40,000 and $60,000. However, a new indicator based on the flow of bitcoin between different types of exchanges suggests that a bull market may be on the horizon.

The indicator, called the Inter-exchange Flow Pulse (IFP), measures the net amount of bitcoin moving from spot exchanges, where traders buy and sell bitcoin for fiat or other cryptocurrencies, to derivative exchanges, where traders can bet on the future price movements of bitcoin using contracts such as futures and options.

According to CryptoQuant, a platform that provides data and analytics for crypto investors, the IFP shows the market sentiment of bitcoin traders. A positive IFP means that more bitcoin is flowing to derivative exchanges, indicating that traders are optimistic and expect higher prices in the future. A negative IFP means that more bitcoin is flowing to spot exchanges, indicating that traders are pessimistic and expect lower prices in the future.

The IFP also has a 90-day moving average, which smooths out the daily fluctuations and shows the long-term trend of the bitcoin flows. CryptoQuant claims that the IFP crossing its 90-day moving average has been a reliable signal of bull and bear markets in the past.

For example, in June 2016, the IFP crossed its 90-day moving average from below, signaling the end of a bear market and the start of a major bull run that lasted until December 2017, when bitcoin reached its all-time high of nearly $20,000. Conversely, in November 2018, the IFP crossed its 90-day moving average from above, signaling the end of a bull market and the start of a prolonged bear market that lasted until April 2019, when bitcoin began to recover.

The chart below shows the historical IFP and its 90-day moving average, along with the green and red areas indicating the bull and bear markets respectively.

Source: CryptoQuant

The current situation of the IFP is interesting, as it has been below its 90-day moving average for 43 days, the longest period since the 2018-2019 bear market. However, the IFP has also been showing signs of recovery since February 7, 2024, when it reached a local bottom of 467.2K. As of February 25, 2024, the IFP was 559.4K, while its 90-day moving average was 568.8K.

This means that the IFP is very close to breaking above its 90-day moving average again, which could indicate that the bulls are regaining strength and that a new bull market may be imminent. Of course, this is not a guarantee, as there are many other factors that affect the price of bitcoin, such as supply and demand, regulation, innovation, adoption, and competition. However, following the data flow closely can help investors make informed decisions and take advantage of the opportunities in the crypto market.

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