A quant has explained why Bitcoin still appears inside a bull market based on the pattern observed in this on-chain indicator.
Bitcoin IFP Is Currently Signaling A Bull Market
In a CryptoQuant Quicktake post, an analyst discussed the trend in the Bitcoin Interexchange Flow Pulse (IFP). The IFP here refers to an on-chain metric measuring the flow of tokens from spot exchanges to derivatives.
When the value of this indicator goes up, the amount of BTC moving from spot to derivatives platforms rises. Such a trend implies that investors want to open more positions in the derivatives market and show their willingness to take on higher risk.
On the other hand, the metric registering a decline could suggest a lower appetite for risk among the investors, as they are shifting a lesser amount to derivatives wallets.
Now, here is a chart that shows the trend in the Bitcoin IFP over the past few months:
As displayed in the above graph, the Bitcoin IFP had declined to relatively low levels in mid-July, but the indicator has witnessed an upward trajectory since then. This would imply that while investors had become risk-averse last month, they have started to become bold again.
In the same chart, the quant has also attached the indicator’s 90-day simple moving average (SMA). Historically, the interactions of the metric with this line have proven to be significant for the cryptocurrency.
During the period of low values earlier, the IFP had been below its 90-day SMA, which has been a bearish signal in the past. The indicator has recently reclaimed the level with its surge, suggesting a flip towards a bullish mentality.
Below is another chart for the Bitcoin IFP, but this time, it zoomed out to showcase the pattern the asset has followed during past cycles.
The graph shows that the Bitcoin IFP saw just one temporary drawdown below its 90-day SMA during the leadup to the 2017 bull run, while the first-half 2021 bull run didn’t see any red signals at all.
Interestingly, the second half of the 2021 bull run mostly occurred with red values, meaning that from the perspective of this indicator, the run may have already been doomed from early on.
The indicator has given a bearish signal twice in the current cycle. Still, given that it has returned to green each time, it’s possible that these were only temporary deviations like during the 2017 cycle, and the bull run isn’t over yet.
BTC Price
At the time of writing, Bitcoin is trading at around $58,600, down 2% over the past 24 hours.
