What are exchange inflows and outflows?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 5 min
In short
These are the amounts moving into and out of addresses believed to belong to exchanges. Since selling requires depositing first, rising inflows are read as potential selling pressure and outflows as a move to self-custody. But the address attribution is inferred and internal transfers get mixed in, so the figure cannot stand alone.
Key points
- Aggregated flows in and out of exchange-held addresses
- Inflows are commonly read as preparation to sell
- The underlying address labels are inferred, not certain
- Internal reshuffling by the exchange distorts the numbers
Definition
The volume of crypto moving into and out of the set of addresses believed to be controlled by exchanges, calculated by aggregating balance changes across addresses that an analytics provider has labelled.
To sell on an exchange you must first deposit there, which is why rising inflows are treated as a sign that selling may be coming. Coins leaving for personal wallets are read the opposite way: as holdings the owner does not intend to sell soon.
The whole indicator assumes we know which addresses belong to exchanges. In reality an analytics provider infers that from deposit patterns and fund flows, and when an exchange starts using new addresses, those flows can go uncounted for a while.
Exchanges also shuffle funds between hot and cold wallets as a matter of routine. When that internal movement is counted as an inflow or outflow, the chart shows swings unrelated to any trading. When a number jumps, the first thing to check is how the provider defines it.
Watch out for
- · Labels are inferences and can diverge from what an exchange actually holds
- · Higher inflows do not mean selling follows, and say nothing about direction
- · Coverage and definitions differ by provider, so do not compare their numbers directly