On-Chain data suggests that a large proportion of Bitcoin exchange inflows are currently coming from investors who are holding their coins at a loss. According to On-Chain analysis company Glassnode, short-term holders are mainly contributing to these loss inflows. The "exchange inflow" is an indicator that measures the total amount of Bitcoin currently flowing into centralized exchange wallets. In general, investors deposit on these platforms when they want to sell, so large inflows can be a sign that there is currently a sell-off happening in the BTC market. Conversely, low values of the metric mean that holders may not be participating in many sales currently, which can be positive for the price.
In the context of the current discussion, the exchange inflow volume profit/loss bias metric is relevant. As the name of this indicator suggests, it tells us whether the inflows to the exchange currently come from profit or loss holders. If this metric has a value greater than 1, it means that the majority of the inflow volume contains coins held by their owners at a profit. Similarly, values below the threshold indicate dominance of loss volume.
As shown in the graph above, the bias for exchange inflow volume for Bitcoin exchange has been above 1 during most of the ongoing rallies that started earlier this year. This suggests that most of the currency inflows during this period came from profit-holders. Of course, this makes sense as every rally generally prompts a large number of holders to sell and reap their profits.
However, there were some exceptions. The first time this happened was in March when the asset's price fell below the $20,000 mark. The market's tendency at that time shifted towards loss sales, indicating that some investors who bought around the local peak began to capitulate. A similar pattern has recently emerged as the cryptocurrency's price fell below the $27,000 mark. After this decline, the value of the indicator dropped to only 0.70.
Further data from Glassnode shows that the tendency of long-term holders (LTHs), or investors who have held their coins for at least 155 days, has recently been oriented towards profit. From the chart, it can be seen that the LTHs indicator has a value of 1.73, indicating a strong orientation towards profit. If the LTHs were not sold at a loss, the short-term holders (STHs) must be the opposite group.
Interestingly, the indicator value for the STHs is 0.69, which is almost exactly the average of the entire market. This would mean that the LTHs recently contributed relatively little to selling pressure. The STHs currently being sold would be those who bought at or near the peak of the rally so far, and their capitulation could be a sign that these weak hands are currently being removed from the market.
Although the indicator has not dropped as low as in March, this capitulation could be a sign that a local low for Bitcoin may be near. At the time of writing this article, Bitcoin is trading at around $26,400, down 1% in the last week.
