Correlation between "bitcoin price" and "transfers to/from exchanges"

[bitesquina]

Hello,

I'm quite newbie to the bitcoin system, so my below theory might be nonsense... But I would like to know your opinion about it:

Given that:
- Bitcoin transfers are public
- We may know the addresses used by the main exchanges: people sending or withdrawing money must know them
- The transfers in/out of those addresses may be monitored

Would it be possible to deduce:
- If exchanges addresses are transferring money out --> people withdrawing money to hodl --> less offer --> price rises
- If exchanges addresses are receiving money --> people getting ready to sell --> more offer --> price falls

Would that be possible?
If so, is anyone already doing this kind of analysis? I didn't find any thread about it.

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[deisik]

Hello,

I'm quite newbie to the bitcoin system, so my below theory might be nonsense... But I would like to know your opinion about it:

Given that:
- Bitcoin transfers are public
- We may know the addresses used by the main exchanges: people sending or withdrawing money must know them
- The transfers in/out of those addresses may be monitored

Would it be possible to deduce:
- If exchanges addresses are transferring money out --> people withdrawing money to hodl --> less offer --> price rises
- If exchanges addresses are receiving money --> people getting ready to sell --> more offer --> price falls

Would that be possible?
If so, is anyone already doing this kind of analysis? I didn't find any thread about it.

I don't know if this is possible

Even if you could carry out this type of analysis, I don't think you would get any coherent results since, to me, it is pretty meaningless anyway. How come? Simply because when people sell and buy at exchanges, they don't typically withdraw the proceeds immediately. They just sit idly and wait for the price to rise (fall) in order to sell (buy) again, then rinse, repeat (and reap profits). And this happens many times until the trading folk decide to withdraw (if ever), so there is no way there could be a meaningful correlation between prices rising (falling) and the number of transactions made to and from exchanges. Hope this helps

[bitesquina]

Hello,

I'm quite newbie to the bitcoin system, so my below theory might be nonsense... But I would like to know your opinion about it:

Given that:
- Bitcoin transfers are public
- We may know the addresses used by the main exchanges: people sending or withdrawing money must know them
- The transfers in/out of those addresses may be monitored

Would it be possible to deduce:
- If exchanges addresses are transferring money out --> people withdrawing money to hodl --> less offer --> price rises
- If exchanges addresses are receiving money --> people getting ready to sell --> more offer --> price falls

Would that be possible?
If so, is anyone already doing this kind of analysis? I didn't find any thread about it.

I don't know if this is possible

Even if you could carry out this type of analysis, I don't think you would get any coherent results since, to me, it is pretty meaningless anyway. How come? Simply because when people sell and buy at exchanges, they don't typically withdraw the proceeds. They just sit idly and wait for the price to rise (fall) in order to sell (buy) again, then rinse, repeat (and reap profits). And this happens many times until the trader decides to withdraw, so there is no way there could be a meaningful correlation between prices rising (falling) and the number of transactions made to and from exchanges. Hope this helps

But people shall withdraw their bitcoins from the exchange if they want to avoid losing them if the exchange closes, like Mt. Gox.

I agree that those doing trading will keep their money in the exchange, but cautious holders shall withdraw.

[deisik]

Hello,

I'm quite newbie to the bitcoin system, so my below theory might be nonsense... But I would like to know your opinion about it:

Given that:
- Bitcoin transfers are public
- We may know the addresses used by the main exchanges: people sending or withdrawing money must know them
- The transfers in/out of those addresses may be monitored

Would it be possible to deduce:
- If exchanges addresses are transferring money out --> people withdrawing money to hodl --> less offer --> price rises
- If exchanges addresses are receiving money --> people getting ready to sell --> more offer --> price falls

Would that be possible?
If so, is anyone already doing this kind of analysis? I didn't find any thread about it.

I don't know if this is possible

Even if you could carry out this type of analysis, I don't think you would get any coherent results since, to me, it is pretty meaningless anyway. How come? Simply because when people sell and buy at exchanges, they don't typically withdraw the proceeds. They just sit idly and wait for the price to rise (fall) in order to sell (buy) again, then rinse, repeat (and reap profits). And this happens many times until the trader decides to withdraw, so there is no way there could be a meaningful correlation between prices rising (falling) and the number of transactions made to and from exchanges. Hope this helps

But people shall withdraw their bitcoins from the exchange if they want to avoid losing them if the exchange closes, like Mt. Gox.

I agree that those doing trading will keep their money in the exchange, but cautious holders shall withdraw

I guess you are thinking up something impossible in practice

If an exchange scams, you are no longer able to withdraw your funds from it, and typically you can't know that in advance unless you are an insider. Basically the same pertains to exchange hacks unless you are the hacker himself. Anyway, we are no longer in 2013 when there had been only one major Bitcoin exchange out there (i.e. Mt. Gox), so today people running away from one exchange (for whatever reason) will be most likely running to another exchange, and thus no effect on price will be present. Nevertheless, if people start massively withdrawing from all exchanges at once like it happened in July due to coming Bitcoin split, it could and did in fact affect prices. But you don't need to run statistical analysis to understand that

[Xavofat]

But you don't need to run statistical analysis to understand that

You don't seem to understand what the OP is trying to analyse.  They're using the money withdrawn from and deposited to exchanges to predict future price movements, not just trying to speculate about what people may have deposited or withdrawn at a specific time.

- We may know the addresses used by the main exchanges: people sending or withdrawing money must know them
- The transfers in/out of those addresses may be monitored

Some exchanges (such as Bitfinex use segregated wallets, which would make this quite difficult to monitor.

You could try contacting a company such as Chainalysis about it but I doubt it would be too easy to do this.

[deisik]

But you don't need to run statistical analysis to understand that

You don't seem to understand what the OP is trying to analyse.  They're using the money withdrawn from and deposited to exchanges to predict future price movements, not just trying to speculate about what people may have deposited or withdrawn at a specific time.

I didn't quite understand what you wanted to say

I mean by the OP "trying to speculate about what people may have deposited or withdrawn at a specific time", according to you. Anyway, you can be pretty sure that this is not what I meant myself. I meant exactly what you wrote first, i.e. evaluating the amount of funds withdrawn (deposited) to "predict future price movements". And in the sentence before the one you quoted I wrote just about that, i.e. people massively withdrawing money from all exchanges may be a sure sign of a future price fall (or at least, significant change), and you don't need correlation analysis to grasp that. You should rather look at a specific cause of this "bank run", so to speak