A quant has explained how altcoin inflows into cryptocurrency exchange Binance might act as a leading indicator for the market.
Spikes In Binance Altcoin Inflows Tend To Precede Corrections
In a CryptoQuant Quicktake post, an analyst has talked about the trend in the altcoin exchange inflows going to Binance. The indicator of relevance here is the “Exchange Inflow Transaction Count,” which measures, as its name suggests, the total number of deposit transactions that investors are making to a given centralized exchange.
Below is a chart for the indicator that shows the trend in the altcoin deposits occurring on the various exchanges.
As is visible in the graph, the altcoin Exchange Inflow Transaction Count peaked on all exchanges right before both the 2024 market tops, implying that deposit activity intensified on the platforms. Generally, investors transfer their coins to exchanges when they want to sell, so spikes in exchange inflows can lead into bearish price action. This appears to be what happened in these two instances.
Interestingly, during the latest market drawdown that has occurred over the past few days, inflows on only one exchange have seen a spike: Binance. There have also been other instances in the past where this pattern developed. “Spikes in Binance inflows (represented by the purple area) frequently precede downward price movements or market corrections,” notes the analyst.
The quant has also explained that Binance is not only the largest exchange in the sector in terms of trading volume, but also a hub for altcoin activity from both retail and institutional entities. As such, investor behavior on the platform can be quite relevant for the wider market.
Speaking of alts, CryptoQuant has shared a few new indicators that can be used to track smart money. One of these is the Average Order Size, which differentiates between futures buy orders by their scale.
The above chart shows the indicator’s data for Hyperliquid (HYPE). It would appear that whale-sized buy orders appeared when the altcoin was trading around $11 earlier in the year. Since then, its price has climbed to $39.
Another indicator is the Retail Activity Through Trading Frequency. This one is the opposite: it points out periods of elevated activity from the small hands.
From this graph, it’s apparent that overheated periods of retail interest coincided with price highs in Gala (GALA).
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At the time of writing, Ethereum is trading around $3,600, down more than 4% over the past week.
