CryptoQuant reported a sharp increase in deposits on Bitcoin, Ethereum and altcoin exchanges, suggesting that volatility in the cryptocurrency market could increase.
According to Julio Moreno, research director at CryptoQuant, Bitcoin deposits on exchanges reached around 49,000. $BTC on June 30. Moreno noted that this was a “rare extreme level” and that daily influxes had only approached 50,000 people. $BTC four times this year.
Moreno said capital inflows of this magnitude have always been followed by sharp increases in price volatility and strong directional movements. According to Moreno, at current levels, the market is trying to absorb the large amount of Bitcoin moving to exchanges, a trend that has been seen in the past before significant price movements.
The report notes that recent Bitcoin inflows are mainly coming from large investors, not small ones. Moreno said the average amount of Bitcoin deposits on exchanges increased from around 1 $BTC at 2 $BTCindicating that whales and institutional investors are moving larger amounts of Bitcoin onto exchanges.
According to CryptoQuant, an increase in the average deposit amount is considered a stronger bearish signal than a high inflow volume alone. Indeed, large investors moving funds to exchanges generally signifies a “conscious change of position” and has historically served as a leading indicator of downward price pressure.
The increase in Bitcoin flows coincided with a period where the price tested the critical support level of $60,000. Moreno said that if this level is breached, Bitcoin could fall back towards its realized price of around $53,000. Bitcoin was trading at around $62,180 at the time of writing, while U.S. Bitcoin spot ETFs saw net inflows of $221.7 million on Thursday, ending a 10-day outflow streak.
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A similar trend was observed in Ethereum. According to data from CryptoQuant, deposits on Ethereum exchanges exceeded 1.25 million ETH at the end of June. Moreno said this indicates increased selling pressure.
According to Moreno, the simultaneous increase in exchange flows observed in both Bitcoin and Ethereum indicates a broader trend of risk aversion rather than a weakness specific to a single asset. This increases the likelihood of overall volatility in the cryptocurrency market.
There has also been a surge in altcoin deposits on exchanges. The number of altcoin deposits reached around 45,000 earlier this week, the highest level in the last two months. Moreno said this level historically signals a “turning point” in terms of prices.
Moreno recalled that a similar increase was seen before Bitcoin fell from around $82,000 in early May to below $58,000 in late June. The CryptoQuant executive argued that the current scenario, in which Bitcoin retests the $60,000 support level, resembles the pattern before the previous downturn and investors should be more cautious.