When a large amount of a token flows into a centralized exchange, it is likely a selling behavior, while withdrawals are the opposite. The logic and principles seem simple, but they often have tremendous power. Cryptocurrency researcher Riyue Xiaochu combines practical examples to analyze how to use CEX inflow and outflow data indicators to guide investment decisions.
Notes: 1) CEX inflow and outflow data needs to be combined with the overall market situation and the rise and fall of the currency, otherwise the error rate is high; 2) In specific situations, its power is greater. For example, if a currency has already had a high increase in value and the market fomo sentiment is high, but the exchange continues to have large inflows, then the probability of a top is very high; 3) Beware of main players intentionally releasing smoke bombs. For example, if a currency has fallen a lot and is oscillating at the bottom, and then there is a large amount of inflow into the exchange, it may be the insiders rushing into the exchange before the pump.
In addition, if you want to use this indicator, the proportion of CEX trading volume is a prerequisite. Generally speaking, newer currencies often have a higher proportion of trades on DEX. After being listed on Binance, the trading volume is basically dominated by Binance. If you don’t know, you can check the trading volume on coinmarketcap. If there is no Binance, you also need to be careful with some second-tier exchanges, as they may use bots to inflate the volume, causing the proportion to be “falsely” high.
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Data sources: 1) Watchers: to view the inflow and outflow of a currency, the free version can be used. Now, after logging in with a wallet + Twitter authentication, you can get the 14-day membership version; 2) Glassnode: you must be a paid member, and most of the tokens are old coins; 3) Blockchain Explorer: all public chains are supported and free, but only individual addresses can be viewed; 4) Jiedata: view inflows and outflows from the perspective of the exchange, and can be used to set alarm reminders. It is currently in the free phase.