To what extent are Bitcoin exchange flows, trading volumes, and price related? A historical view

To our surprise, we previously found that weekend decreases in Bitcoin trading volumes aren’t preceded by weekend decreases in the net inflow of Bitcoin to exchanges. It led us to wonder how else trading volumes and exchange flows are separable metrics. Here, we extend our findings by exploring the relationships between Bitcoin exchange flows and trading volumes, their relationships with price, and their relationships with themselves across time. This new set of findings sheds additional light on how trading volumes and exchange flows are related — and unrelated — which may be useful for traders and investors who use these metrics as indicators of future price movement.

Data used in our analysis included historical Bitcoin daily trading volume (amount of money flowing between trading pairs numerated by Bitcoin), daily netflow (the difference between Bitcoin flowing into and out of exchanges’ wallets), and daily USD-denominated closing price collected across seven major exchanges from September 1, 2017 to September 12, 2021 with a sample size of 1,473. (Huobi volume data was only available from January 18, 2018 to September 12, 2021.) The exchanges examined are presented in the table below along with measures of their size and liquidity.