IntoTheBlock has built a proprietary machine learning powered classifier to identify addresses of top centralized exchanges, including their deposit addresses, withdrawal addresses, hot wallets and cold wallets. With this classifier, IntoTheBlock can measure the total amount of a given crypto-asset flowing into exchanges and measures this in dollar and crypto terms. The result is the Inflow Volume indicator.
Exchanges Inflow Volume for Bitcoin
Exchange inflows are helpful to track funds going into exchanges. Spikes in inflows tend to coincide with and sometimes precede periods of high volatility as shown above. This can potentially be interpreted as a sign of holders looking to sell in centralized exchanges.
At the same time, there are natural fluctuations in inflows as centralized exchanges and institutional players manage their funds. For instance, unsurprisingly inflows tend to drop on weekends and increase during the week.
Overall, Inflow Volume can be helpful to spot periods of high volatility, but users should also consider there are natural fluctuations in the indicator which make it less predictive during periods of low volatility.