Bitcoin Liquidity Warning: Inter-Exchange Flows Turn Red

Bitcoin’s market structure showed mixed signals as inter exchange flows weakened while exchange reserves stayed historically low. As a result, traders faced a tighter liquidity setup even as price held near recent highs.

Bitcoin Faces Liquidity Test as Inter Exchange Flows Turn Negative

Bitcoin traded at a critical point as inter exchange liquidity signals weakened, according to data shared by analyst Kamran Asghar on X. The Inter exchange Flow Pulse, or IFP, slipped into the red zone, a level that has historically aligned with periods of consolidation or market corrections. While Bitcoin’s price remained relatively firm, the underlying flow data pointed to fading liquidity support across exchanges.

Bitcoin Inter exchange Flow Pulse IFP Chart. Source: CryptoQuant via Kamran

The IFP tracks how Bitcoin moves between trading venues, offering insight into whether capital flows support bullish continuation or signal stress. In the current setup, the indicator moved below its neutral range, suggesting that inter exchange demand is no longer expanding. Past cycles on the same chart show that similar red zone readings often preceded sideways trading or deeper pullbacks, even when spot prices initially held steady.

At the same time, Bitcoin’s price line continued to hover near recent highs, creating a divergence between price action and liquidity flows. Analysts often view such gaps as warning signs, as prices can struggle to sustain momentum without strong inter exchange activity. According to the chart, previous periods where price remained elevated while IFP weakened eventually resolved through either prolonged consolidation or sharp corrections once selling pressure increased.

The chart also shows that earlier bullish phases aligned closely with sustained green IFP zones, where inter exchange flows expanded alongside rising prices. In contrast, the current red reading indicates that liquidity conditions have shifted, even though broader market sentiment has not fully adjusted. As a result, the data suggests Bitcoin may remain range bound in the near term unless inter exchange flows recover and return to positive territory.

For now, the IFP signal places Bitcoin at a crossroads, where price stability depends heavily on whether liquidity reenters the market. Without renewed flow support, historical patterns imply that upside momentum could stall, leaving the market vulnerable to corrective moves.

Bitcoin Exchange Reserves Hit Historically Low Levels as Supply Tightens

Meanwhile, Bitcoin reserves held on exchanges fell to historically low levels, according to data shared by analyst Quinten François on X, citing Glassnode metrics. The chart shows a steady decline in total Bitcoin balances across trading platforms, even as price trended higher over the long term. The divergence highlights a structural shift in how Bitcoin is held and supplied in the market.

BTC Balance on Exchanges Total Deribit BTC Chart. Source: Glassnode via Quinten François on X

The exchange balance metric tracks how much Bitcoin remains available on centralized venues for immediate trading. Over time, declining balances often signal that investors are moving coins off exchanges into long term storage or self custody. In the current cycle, reserves continued to trend lower despite periods of sharp price volatility, suggesting that available sell side supply has not rebuilt meaningfully.

At the same time, Bitcoin’s price has remained elevated compared to earlier cycles when exchange balances were higher. Historically, similar setups appeared during phases when reduced liquid supply amplified price sensitivity to demand shifts. With fewer coins readily available on exchanges, even moderate buying pressure has the potential to move prices more aggressively, while sell offs may depend on new inflows rather than existing reserves.

The chart also shows that past market tops often aligned with rising or stabilizing exchange balances, as holders moved coins back to exchanges to realize profits. In contrast, the current structure shows no sustained rebound in reserves, despite Bitcoin trading near cycle highs. This imbalance suggests that many holders remain reluctant to deploy supply, reinforcing tighter liquidity conditions.

Overall, historically low exchange reserves point to a constrained supply environment for Bitcoin. While this does not dictate short term price direction, the data indicates that market structure has shifted toward lower immediate liquidity, making future price moves more dependent on changes in inflows rather than existing exchange inventory.