Is The Tide Turning For Bitcoin? Recent Reserves And Netflows Indicate Market Reversal

Analysts from the market intelligence company CryptoQuant note that current patterns in Bitcoin (BTC) metrics indicate possible changes in market dynamics.

Bitcoin Price Faces Short-Term Volatility 

After a period of steady decline, spot exchange reserves have experienced a notable uptick, reflecting an inflow of 20,000 BTC. This increase suggests that more Bitcoin is being deposited into exchanges, which often indicates an intention to trade or sell. 

This type of behavior may add further selling pressure to the Bitcoin price, which has declined almost 7% over the last two weeks, signaling a potential early sign of short-term volatility.

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Simultaneously, netflows across all exchanges have turned positive, with a net increase of 15,800 BTC. This reversal from the predominantly negative trend seen in recent weeks implies that inflows to exchanges are now exceeding outflows. 

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When combined with rising reserves, this shift strengthens the likelihood of increased trading activity or profit-taking by investors, according to CryptoQuant’s analysis. 

While the broader trend in the market has favored accumulation and self-custody, these recent changes may reflect a growing caution among investors, who might be preparing for profit-taking or bracing for a potential price correction.

Furthermore, a report by Bloomberg highlights a key metric gauging investor interest in Bitcoin from South Korea, which has risen to a four-month high amid ongoing political turmoil in the East Asian country. 

Trading Volumes Surge As Political Crisis Unfolds

Known as the “Kimchi Premium,” this metric measures the price gap between Bitcoin on South Korean exchange Upbit and Coinbase. Recently, this premium surged to the range of 3-5%, indicating heightened demand from South Korean investors. 

Per the report, the political landscape in South Korea has been tumultuous, particularly following President Yoon Suk Yeol’s brief and controversial declaration of martial law earlier this month, which lasted only six hours before being rescinded. 

Subsequently, the National Assembly impeached Yoon on December 14, suspending his powers and elevating Prime Minister Han Duck-soo to the role of acting president. In a further development, the parliament voted to impeach Han as well, marking a historic first for an acting president in South Korea. 

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These political upheavals have rattled financial markets, coinciding with growing economic challenges and increasing nuclear threats from North Korea. The South Korean won has also seen a decline of 0.35% against the US dollar.

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According to Bloomberg, South Korea remains one of the most active retail markets for cryptocurrencies, with trading volumes on Korea-based exchanges often surpassing those on traditional stock exchanges. 

Ki Young Ju, founder and CEO of CryptoQuant, pointed out that corporate accounts are not permitted on Korean crypto exchanges, meaning that the vast majority of crypto activity in the country is driven by retail investors. 

The Kimchi Premium has become a well-known metric for measuring retail interest in cryptocurrency, and factors such as strict currency controls and anti-money laundering (AML) regulations have contributed to this phenomenon.

At the time of writing, BTC is priced at $93,938, experiencing a 2.5% decrease over the last 24 hours, with its closest support level at $92,000 serving to halt additional declines for the top cryptocurrency in the market.

Featured image from DALL-E, chart from TradingView.com