Declining Bitcoin Inflows Suggest Shifting Market Sentiment

Key Points

• Bitcoin’s 7-day inflows decline, signaling reduced market supply and shifting sentiment.
  
• CEX market activity cools, with inflow activity down to 70K BTC from March’s 266K BTC.
  
• MVRV Z-Score shows Bitcoin is trading near fair value, indicating a neutral-to-cheap valuation.
  

Bitcoin’s 7-day moving average for total inflows across all exchanges is declining. This trend could reflect shifting market sentiment. While high inflows to spot exchanges often suggest potential selling pressure, the situation for derivative exchanges is more complex. 

Increases in inflows to derivatives don’t necessarily signal a market direction. Instead, they may indicate the potential for high volatility, as funds could be used for both long and short positions. 

However, the ongoing decrease in inflows suggests that holders may be growing more confident in keeping their assets off exchanges. As a result, this could signal a decrease in supply in the near term.

CEX Market Cooling and MVRV Analysis

Looking at the CEX market, the data suggests a cooling trend. Exchange flow activity is low, with a Flow Activity Pressure of 9, which indicates a calm market. The current average gross (inflow + outflow) stands at 70K BTC, a stark contrast to the 266K BTC peak in March 2024. 

The Net Flow 30D Z-Score is currently at -0.7, showing a moderate bias towards purchases. This suggests that every Bitcoin that comes to exchanges is being bought up, leading to reserves being spent to meet demand. 

Additionally, the MVRV Z-Score (365D) has dropped to the base zone at -0.3, reflecting a downward bias. This means that Bitcoin’s market capitalization is trading close to its fair value, adjusted for annual volatility. 

The valuation appears neutral-to-moderately “cheap” compared to the previous year, indicating no signs of overheating.

Bitcoin’s price remains at $111,408, with a $1,500 decline (-1.35%) in the last 24 hours. The market cap is $2.22 trillion, and the circulating supply is 19.93 million BTC. 

Bitcoin continues to see dominance in futures trading, with $87.80 billion in futures volume in the past 24 hours. In comparison, spot volume is significantly lower at $5.22 billion, and the open interest is $79.94 billion. 

Over the past 7 days, Bitcoin has decreased by 4.33%, but it remains up 73.28% over the past year. The Binance BTC/USDT long/short ratio is 1.7012, showing a bullish market sentiment.