Bitcoin is up more than 10% in the last 24 hours as the price of the coin hits $ 47.5k. The past pattern can shed light on whether it is just a dead cat bounce or a clue to an actual upward movement.
Comparison of Bitcoin Net Flows from Latest Dead Cat Bounces
As noted in a CryptoQuant post, a look at BTC network flows from past cycles can reveal the pattern that dead cat bounces have historically followed.
The “netflow” of the Bitcoin exchange is an indicator that is defined as the difference between entry and exit.
When exchanges see higher inflows compared to outflows, their reserves earn a net amount of BTC and the net flow shows positive values.
On the other hand, higher outflows lead to a net amount of Bitcoin leaving exchanges, so the net flow takes negative values.
The sustained negative values of the indicator have generally been bullish for the price of the currency, since they imply that there is a buying pressure in the market, while the positive values may be bearish.
Now, this is what the 2018 dead cat bounce looked like with netflows:
Bitcoin netflows during 2018
As you can see from the chart above, the indicator showed highly positive values during the dead cat bounce formation in 2018.
Below is another graph, this time for the year 2019:
The Dead Cat Bounce of 2019
Similar to the other chart, here too the move up ended as a dead cat bounce as Bitcoin inflows dominated the exchanges.
However, as soon as the net flows started to decline and eventually turned negative, the price experienced a sharp increase.
Related reading | Quant: Bitcoin indicators now look like Q4 2020, a breakthrough?
Now, here is a graph of what happened in 2017:
Bitcoin price in 2017 vs. netflows
Here, when the peak occurred, the net flows were also very positive and therefore the price fell. But tickets were also drastically reduced shortly thereafter and what followed was a huge price hike.
Related reading | Bitcoin bearish signal: on-chain data shows whales have started selling
Finally, what do 2021 netflows look like?
Bitcoin Netflows Right Now
The spike that formed after the ATH this year was in fact a dead cat rebound, as the highly positive net flows confirm. However, this time is different.
The netflows seem to be very negative now. With these values, it seems more likely that the trend is similar to that of 2017, where negative net flows raised the price.
At the time of writing, the price of Bitcoin is hovering around $ 47.5k, up 15% in the last seven days. Here is a graph showing the trend in the price of the coin over the last five days:
The price of BTC rises | Source: BTCUSD on TradingView Featured Image from Unsplash.com, Charts from TradingView.com, CryptoQuant.com