Quote from: windjc on April 02, 2014, 02:49:55 AM

Arepo,

One thing I am not sure how TA can address is off-exchange transactions.

What I mean by this is that you provided a lot of great info in your newsletter about historical money flow.

However, if we were to make the assumption that larger buyers and institutional buyers are making a historically high amount of bitcoin purchases off exchange, how would we account for this in money flow?

It seems theoretically that lack of money flow could be offset by lack of bitcoin available on exchanges.

I guess we would have to measure historical ask sums to try to get a read on this?

this is a great point. off-exchange capital inflow would definitely be absent from indicators like the Chaikin Money Flow which was the focus of that argument in the newsletter.

putting aside whether or not it is true that institutional buyers are making historically high amounts of purchases, how would be the best way to verify this?

while the CMF may not respond clearly to such "hidden" buying pressure, other data certainly would. your suggestion of looking at historical ask sums i think is the most obvious and straightforward way. these large buys would not show up as volume on the exchanges, but they would certainly affect the available supply.

also, while the CMF may not directly account for this buying pressure, many of the indicators i rely on are well-calibrated to a whole range of market environments. for instance, the CMF, like many other indicators, is a range-volume transform. The thin ask side that results from this choked supply would yield larger price gains with equivalent volume during bull markets, which would multiply the height of positive divergences and may help maintain the faithfulness of the signals in the indicator data.

--arepo