BTC falls below $40,000, and the amount of Bitcoin flowing into centralized exchanges surges

A surge in Bitcoin inflows to centralized exchanges has prompted speculation that a dramatic shakeout could be brewing in the cryptocurrency market.

Lex Moskovoski, CIO of Moskovoski Capital, shared data showing that 22,917 BTC were transferred to centralized exchanges in one hour on May 18. Moskovoski noted that the hourly inflow was the largest since the “Black Thursday” crash in March 2020.

Outflows from exchanges are often inferred as crypto assets being moved to secure cold wallets or to yield-generating DeFi protocols, while inflows are interpreted as assets being transferred to centralized platforms for sale.

Data compiled by on-chain cryptocurrency analytics firm Glassnode shows that the net transfer volume of Bitcoin to the top centralized exchange Binance has hit a record high in the past two days. The data was shared by Twitter analyst William Clemente III to his 70,400 followers, triggering bearish price predictions on social media.

The chart shows that approximately 35,000 Bitcoins worth more than $1.4 billion have been deposited into Binance in the past 48 hours.

“It feels like capitulation,” said Dan Held, Kraken’s head of growth. Clement responded by saying “Let’s see the last nasty liquidation wick.”

Reasons to cheer up

Even though Bitcoin prices have been falling, reaching lows below $40,000, some analysts are finding reasons to be bullish.

Popular analyst Lark Davis noted that the recent drop pushed Bitcoin’s 14-day relative strength indicator into the oversold zone for the first time since March 2020, suggesting that the plunge may have reached its limit.

Others see this as a possible catalyst for a bullish recovery, predicting a swift resumption of upward momentum once selling is exhausted.

Twitter user "YHRW80" noticed a surge in funds flowing into Bitcoin spot and derivatives markets during 2021 and concluded that the main emotion enveloping the market was "greed" rather than fear.

However, Bitcoin’s Fear and Greed Index disagrees with YHRW80’s analysis, describing the current Bitcoin market sentiment as “extreme fear.”

There was some welcome news today, with Indian media reporting that the country’s government will reconsider its planned cryptocurrency ban and form a new expert panel to explore regulating crypto assets in India.

Some analysts believe the catalyst for the massive inflows was a deadline for stablecoin issuer Tether to disclose its quarterly financial records as part of its settlement with the New York Attorney General’s office.

Last week, Tether published a breakdown of its reserves for the first time, claiming that three-quarters of the assets backing its stablecoin are cash, cash equivalents and other short-term deposits and commercial paper.