Key Points
- Bitcoin [BTC] has typically experienced a bearish January in the year following the halving.
- The flow of BTC into and out of centralized exchanges provides valuable insight into market participant behavior.
Bitcoin’s Historical Performance
Bitcoin [BTC] has had a challenging couple of months, with the $100k psychological level proving difficult to surpass. Despite brief moments of support at this level, sellers have managed to drive the price down.
According to a post on a popular social media platform, Bitcoin’s drawdown in January following the halving year is a recurring pattern. If history repeats itself, March could see Bitcoin trading near $130k.
Insights from Exchange Flow Data
Analyzing the flow of BTC into and out of centralized exchanges can provide valuable insights into market behavior. Recently, short-term holders have been in a distribution phase, but their selling pressure is expected to decrease. This could potentially aid Bitcoin’s recovery.
The 30-day moving average of Bitcoin inflows to exchanges has been declining since an early December peak. This decline has brought the 30 DMA to lows similar to those seen in October and June 2024.
Netflows, the difference between inflows and outflows, have also been trending downwards. The 30 DMA has been mostly negative since March 2024, with a brief period of positive flows in the second week of May.
Comparing recent flows to past cycles, such a sustained period of negative netflows (or outflows) is unprecedented. In 2020, netflows were negative from late August to the final week of November. However, the past eleven months’ flow has significantly exceeded the previous run’s three-month outflows.
This suggests a stronger bullish conviction in Bitcoin this time around. While this may not result in equally dramatic price gains, it could mean that long-term holders are less likely to panic and sell during significant pullbacks. This could potentially reduce the volatility and deep drawdowns typically associated with a BTC bull run.
