Record BTC inflow into Binance triggers selling pressure FUD as crypto prices reel

On-chain data revealed that Monday and Tuesday saw the largest Bitcoin inflows to Binance since the beginning of the year. The surge in BTC inflows also coincided with Bitcoin’s continued downward momentum and triggered FUD, driven by selling pressure building on Binance.

Binance saw between 56,000 and 59,000 BTC flowing into the exchange over those two days. The inflows also occurred at a key moment, when Bitcoin was trading near a critical level of $74,000.

Bitcoin enters a capitulation phase

One analyst argued that a break below that level would technically call the long-term trend into question. The analyst noted that as BTC approaches such a critical level, it creates panic among some investors, causing them to move their digital assets to Binance.

Short-term BTC holders also contributed to the inflows sent to Binance. On-chain data showed that the cohort of holders sent around 54,000 BTC to Binance, incurring a loss, on February 2 alone.

Large BTC inflows to Binance have historically represented real selling pressure on the spot market. The analyst suggested that, despite the FUD that usually accompanies such panic phases, the current selling pressure is not abnormal given the scale of the recorded flows.

The analyst stated that the current flows into Binance suggest that the market is entering a phase of capitulation and panic as BTC becomes oversold. He also noted that such context has historically enabled the formation of a bottom, both in the short-term and over longer horizons. Glassnode data also showed that Bitcoin’s Realized Profit/Loss Ratio is nearing 1, a level that’s historically been linked to market capitulation.

At the time of publication, Bitcoin is trading around $75,630, down more than 3.3% in the previous 24 hours. BTC has also dropped by nearly 15.4% over the last 7 days and 18.55% in the last 30 days. Bitcoin has already entered its 5th consecutive month of correction.

On-chain data showed that BTC spot volumes have dropped by more than 50% since the October 10 event, which led to a massive liquidity drain. Binance still holds the largest share of BTC spot volumes at $104 billion. 

The analyst argued that the contraction in volumes has brought the market back to levels among the lowest observed since 2024. He also suggested that the contraction in volumes indicates apparent disengagement by investors in the crypto market and, consequently, weaker demand. 

Bitcoin funding rates on Binance drop below 0.01%

BTC funding rates on Binance have moved deeply into negative territory, currently at -0.0045, suggesting that short dominance in the market is surging. Binance applies a 0.01% interest rate in its funding rate formula, meaning the neutral funding rate when analyzing market dominance is 0.01% and not 0. 

On-chain data suggests that shorts are currently dominating since the funding rate is below 0.01%. The analyst argued that funding rates on Binance are entering an extreme zone, signaling an accumulation of short positions and bearish momentum among investors. He also believes that the current market position has historically preceded trend reversals.

Young stated on Tuesday that the Binance FUDers triggered a $600 million net outflow, representing 0.3% of their total reserves. On-chain data showed that many users were closing their Binance accounts, triggering a withdrawal crisis on the crypto exchange. Binance acknowledged that it has observed some technical difficulties affecting withdrawals on the platform, and its team is working on a fix.

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