On March 13, 2023, Euler Finance, an Ethereum-based noncustodial lending protocol, became the victim of a flash loan attack. The attacker managed to steal millions in various cryptocurrencies, including Dai, USD Coin, staked Ether, and wrapped Bitcoin. According to on-chain data, the exploiter carried out multiple transactions and stole nearly $196 million, making it the largest hack of the year.
The breakdown of stolen funds is as follows: $87 million in Dai, $51 million in USDC, $40 million in stETH, and $17 million in WBTC. Euler Finance has not yet made an official statement regarding the attack, and it remains unclear whether the stolen funds will be recovered.
Crypto analytic firm Meta Seluth stated that the attack is related to a deflation attack that occurred one month ago. The attacker used a multichain bridge to transfer the funds from the Binance Smart Chain (BSC) to Ethereum and launched the attack today. ZachXBT, another prominent on-chain sleuth, reiterated the same and said that the movement of funds and the nature of the attack seem quite similar to the black hats that exploited a BSC-based protocol last month.
The attack on Euler Finance highlights the risks associated with flash loans, which are uncollateralized loans that allow traders to borrow large amounts of capital without putting up any assets as collateral. Flash loans have become increasingly popular in the DeFi space and have been used in several high-profile attacks, including the $600 million hack of Poly Network in August 2021.
Flash loan attacks are a growing concern for the DeFi ecosystem, and several projects have taken steps to mitigate the risks associated with these loans. For example, Aave, a popular DeFi lending platform, has implemented a cooldown period for flash loans, requiring borrowers to wait for a period before taking out another loan. Similarly, Compound Finance has implemented a fee on flash loans to deter attackers.
Euler Finance is just the latest DeFi project to fall victim to a flash loan attack, highlighting the need for better security measures in the DeFi ecosystem. As the DeFi space continues to grow, it is essential to implement robust security measures to protect users’ funds and prevent attacks like these from happening in the future.
The merge is expected to transition the Ethereum network to a proof-of-stake (PoS) consensus mechanism from the current proof-of-work (PoS) framework, which has been elusive for a few years.
Previously, Ethereum researcher Justin Drake revealed that the merge was likely to happen in August because testing was in the final round.
Nevertheless, during a recent developers’ call, September 19 emerged as the most probable date for the transition. It was stipulated:
“Merge two weeks later (Sept 19th).”
An Ethereum Beacon Chain community health consultant, however, hinted that the merge date was not final and said:
“This merge timeline isn’t final, but it’s extremely exciting to see it coming together. Please regard this as a planning timeline and look out for official announcements.”
Therefore, this news made the ETH market rally powerfully. On-chain insight provider Glassnode explained:
“Ethereum markets have rallied strongly off the back of a large short squeeze in futures markets. Over $98M in short futures positions were liquidated in one hour, pushing ETH prices up by 12.5%.”
The merge is estimated to be the biggest software upgrade in the Ethereum ecosystem because the PoS algorithm will allow the confirmation of blocks in a more energy-efficient way. Therefore, validators are required to stake Ether instead of solving a cryptographic puzzle.
A DeFi educator under the pseudonym Korpi recently opined that the merge would be a game-changer because it would shift the selling pressure experienced in the Ethereum network. After all, structural supply will change to structural buying.
Bitcoin on-chain data shows that miners have transferred a huge amount of coins to cryptocurrency exchanges.
On-chain Data Suggests Miners Transferred 11,816 BTC To Exchanges
As pointed out by a CryptoQuant post, 20 July saw a huge outflow from Bitcoin miners. The total outflow from that day is around 12k.
Here is a chart that illustrates the trend in all miners BTC outflow over the last one year:
5 BTC + 300 Free Spins for new players & 15 BTC + 35.000 Free Spins every month, only at mBitcasino. Play Now!
BTC miner outflow seems to have spiked
There are a few interesting features in the chart. This sudden rise of almost 12k BTC observed on Wednesday is the most since May, when the price of the cryptocurrency crashed around 50%.
Related Reading | As Bitcoin Drops Below $30k, Stablecoins Surpass $100 Billion In Total Supply
Get 110 USDT Futures Bonus for FREE!
This spike comes after a period where the miner outflows were relatively low when compared to the preceding months.
As miner outflows only show how much Bitcoin was transferred by miners to exchanges, it’s not possible to tell how much of it was actually sold off.
However, if the indicator’s value goes up, it does showcase that selling pressure has increased among miners, and it could impact the price of the crypto.
Related Reading | TA: Bitcoin Bears Lose Strength, What Could Trigger A Decent Recovery
Another metric for knowing whether miners are selling or not is the Bitcoin all miners to all exchanges flow mean indicator. Here is the chart for it:
BTC miner to exchanges flow mean seems to be on the rise
The above graph makes it clear that the value of this indicator has been on the rise for sometime now, and 20 July also saw a spike.
The all miners to all exchanges flow mean showcases how the average transaction from miners to exchanges looks like. For 20 July, this value was just over 80 BTC, less than the 98 BTC spike seen just a few days back.
Though there are two things to consider regarding these miner metrics. The first is that many mining pools don’t believe that data like this is authentic.
The second is that due to China’s crackdowns on Bitcoin mining, the world hashrate took a nosedive. Now, miners have started relocating and restarting their operations in other countries. This would undoubtedly result in a change in these metrics as well.
At the time of writing, BTC’s price floats around $32.5k, down 0.5% in the last 7 days.
Below is a chart showing the trend in the price of Bitcoin over the past 6 months.
BTC seems to be going up after a dip below $30k | Source: BTCUSD on TradingView
After a crash below $30k, Bitcoin has started to climb back up quickly. It remains to be seen if the coin can continue this trend and finally break past $35k, or if it’s going to be stuck in the same range as before again.
Featured image from Pexels.com, charts from CryptoQuant, TradingView.com
Bitcoin dropped to lows of $30,000 on Coinbase, dipping as low as $28,500 on some derivatives exchanges like BitMEX.
Many lowe-cap coins crashed around 50% from daily opening due to large-scale liquidations.
On-chain analysis suggests that long-term investors are bullish despite the crash.
Share this article
Bitcoin’s 30% plunge yesterday echoed with the beginning of the 2018 bear market. Still, on-chain data indicates that long-term holders have strong hands.
Maximum Pain in Bitcoin Prices
Bitcoin dipped 30% yesterday as $800 billion in valuation was wiped out across the broader crypto market. According to TradingView, the total market capitalization of cryptocurrencies fell to lows of $1.2 trillion from an all-time high last week.
In the past, such downtrends have been seen only four times since Bitcoin’s top in 2017, with three of the four occasions leading to a prolonged bear market.
The first was on Dec. 24 when Bitcoin dropped drastically after touching a top of $19,600 five days earlier.
The asset dipped two months later then hit lows of $4,000 in Nov. 2018. On both occasions, the move kickstarted a bear trend.
Many other compelling arguments find relevance with the 2017 top. For instance, Bitcoin’s dominance over the cryptocurrency market is 44%, which is a similar level to when it topped out in late 2017.
Furthermore, the euphoria caused by the Coinbase direct listing seems co-incidental with CBoE futures debut in December 2017. In retrospect, the surge of so-called “dog tokens” like Shiba Inu was another palpable top sign. Nevertheless, following the “diamond hands” narrative in crypto, on-chain data suggests that old investors are still holding onto Bitcoin.
On-chain Analysis Highlights Faith in BTC
Before the top in Dec. 2017, the coin days destroyed (CDD) metric saw a significant spike in activity. The CDD metric tracks the time when Bitcoin was last moved in an address multiplied with the value transferred. Older addresses and large BTC transactions cause a spike in CDD.
While there was a considerable sell-off in Q3 of 2020, the CDD in the last two months has been 50% less than the months before the negative trend in 2017. This suggests that long-term investors have not moved their assets in recent months.
Moreover, a closer look at the movement in the last two days points to the “buy-the-dip” action by whales. Crypto analytics firm Chainalysis noted that “Bitcoin inflows into exchanges are relatively low compared to past sell-offs.” Inflows are an indicator of fear in the market following a large drop. Low inflows indicate optimism among holders.
The firm also found that whales—classified as holders with more than 1,000 BTC—added 34,000 Bitcoin to their addresses on Tuesday and Wednesday, having sold 51,000 the previous week.
The wipe-out of the futures market, which saw a huge $8.6 billion in liquidations, is a positive sign for more upside in crypto prices. This is because a highly leveraged market is far riskier, and prices tend to deviate from organic growth. Ulrik K. Lykke, Executive Director at crypto hedge fundARK36said:
“In terms of Bitcoin’s outlook, things may be looking grim right now, but historically this is just yet another hurdle for Bitcoin to overcome and a small one compared to what it has braved in the past.”
Lykke added the performance is consistent as “in 2017, price dives in the range of 35%+ happened several times before the price topped out.” Bitcoin dropped over 30% from local tops multiple times during the last run-up in 2017.
The evolution of DeFi on Ethereum in promoting financial use cases like borrowing and trading and the new-found institutional interest has strengthened the market. Nevertheless, prices could be volatile over the coming weeks as less credible projects are weeded out from the market.
Share this article
The information on or accessed through this website is obtained from independent sources we believe to be accurate and reliable, but Decentral Media, Inc. makes no representation or warranty as to the timeliness, completeness, or accuracy of any information on or accessed through this website. Decentral Media, Inc. is not an investment advisor. We do not give personalized investment advice or other financial advice. The information on this website is subject to change without notice. Some or all of the information on this website may become outdated, or it may be or become incomplete or inaccurate. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information.
You should never make an investment decision on an ICO, IEO, or other investment based on the information on this website, and you should never interpret or otherwise rely on any of the information on this website as investment advice. We strongly recommend that you consult a licensed investment advisor or other qualified financial professional if you are seeking investment advice on an ICO, IEO, or other investment. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities.
See full terms and conditions.
“Speculative” Bitcoin Needs Regulation, Says ECB President
ECB President Christine Lagarde has called for the regulation of Bitcoin. She argued that the asset is “highly speculative” and has been used for money laundering in the past. ECB…
Bitcoin Is Now in Overbought Territory Following Elon Musk’s End…
Market participants seem to have entered an irrational FOMO state after Tesla and SpaceX CEO Elon Musk suggested that he now supports Bitcoin. Bitcoin Skyrockets Following Crucial Endorsement Musk tweeted…
Bitcoin Plunges, Rebounds on Elon Musk Tweets
After Tesla’s U-turn on receiving Bitcoin payments, Elon Musk caused the crypto market to plunge by responding to a post suggesting that Tesla may sell its Bitcoin holdings. The market…
What Are Non-Fungible Tokens (NFTs)?
Tokenization is well-suited for commodities like fiat currencies, gold, and physical land. A fungible asset’s representation on blockchain makes commodities tradable 24/7 via borderless and frictionless transactions. Fungible goods are…
After weeks of Bitcoin (BTC) sell-offs, high-net worth individuals, or whales, are finally back to buying.
Their buying activity did not only pick up when the BTC price broke out of the two-months ascending triangle to new all-time highs, but also stayed intact since the price crash on April 18.
Whales have come back to accumulate Bitcoin
Their continuous buying activity comes at a time when addresses holding more than 1,000 Bitcoin reached their 4-month support line.
This is probably not a coincidence as the turnaround takes place at a time when profit-taking in the market is close to its support line too.
Current profit-taking behavior has followed a 7-month trend
The level at which profit-taking takes place can be derived from the adjusted Spent Output Profit Ratio (aSOPR), which measures the ratio between the price sold and the price paid for a coin while disregarding temporary coin movements (movements within less than 1 hour).
In other words, aSOPR measures by how much holders were sitting in profit (in USD) by the time they sold their coins.
Since September 2020, profit-taking has kept finding positive support at higher levels. This suggests that whenever sell-offs happened in the past seven months, sellers were comfortable not selling at a higher profit level each time, compared to the previous sell-offs. However, this trend might eventually come to an end.
Profit-taking activity suggests the market is at a pivotal moment
When zooming out and looking at profit-taking behavior in all prior bull markets, it becomes apparent that this is not only a one-time or a short-term trend but rather a longer-term pattern in Bitcoin bull markets.
These support lines tend to hold for 3-18 months. The chart below shows that a break of the second support line in each bull market historically confirmed that the bull market top was in.
Not only is the aSOPR close to breaking the 7-month support, but there is also one major difference in the latest pattern of this metric that could be a cause of concern.
Usually, the short-term tops of the aSOPR come in at higher levels each time as price increases further and rising confidence leads people to hold on to higher profits after each sell-off.
However, in the latest pattern, profits have been realized earlier in every sell-off wave for the last three months (see red arrow), a pattern usually common after a bull market top was already in.
Short-term sellers are in the driver’s seat
The latest pattern could be explained by a slower price increase in recent months and a higher number of short-term holders realizing profits. This assumption is confirmed by looking at HODL Waves, which visualize the time Bitcoins are held on to.
The redder the color, the shorter the holding period. It becomes visible that it is short-term holders who have held Bitcoin for between one week and three months have been primarily selling into the market as of late.
When looking at the profit-taking behavior of short-term holders (STH-SOPR) only, one could infer that this cohort of traders might almost be done selling. The latest dip below the value of 1 shows that short-term holders even started realizing losses.
In a bull market run-up, this is usually where a bottom in price could be expected as selling activity tends to decrease significantly.
However, as bull market tops are not formed by a lack of sellers but rather by a lack of buyers, it is highly important to also look at the trend of the current demand side.
Current on-chain volume activity suggests that the capital inflow trend is still intact. A high number of coins are still changing hands, suggesting that buying activity is still ongoing. The realized price, which expresses this buying activity by valuing all Bitcoins based on when they last moved on a daily basis, gives a good idea of how much capital moved in and out of Bitcoin.
A steep curve suggests high on-chain transaction volumes. If it is followed by a flat trend, it usually indicates the beginning of the bear market as not enough buyers are coming into the market willing to pay higher prices anymore. As long as this steep curve does not flatten, there should be no concern about a dwindling number of buyers.
Although this evidence suggests that the bull market top is likely not in yet, there is also no clear confirmation that sellers are done selling just yet.
A break of the aSOPR 10-day moving average support line could be confirmed in the next few days. This may signal a trend shift in sellers’ behavior from bullish to bearish. Therefore, a negative short- to mid-term scenario should be considered if this occurs.
Support levels in a bearish case
There are two major price support levels to look out for. The first one is around $51,325, which could be a strong defense zonea support level where whales most recently acquired a high volume of Bitcoin.
The second price support level is the NVT (Network Value to Transactions Ratio) price, which is currently at $47,679 and is a major price support level in Bitcoin bull markets.
If the market price was to fall significantly below the NVT price without a quick recovery within a few days, a detailed analysis of the demand side would be needed to judge if the market’s bullish structure has broken.
Market at a critical level, strong support between $47K–$51K
The supply-side suggests that sellers are currently in the driver’s seat, even selling Bitcoin at a loss in the past few days. However, their selling activity is expected to significantly reduce over the next few days if current behavior stays in line with prior bull market sell-offs.
If that is not the case, the breakdown of the aSOPR 7-month support line is likely and could signal a trend shift from bullish to bearish selling. Further downside should be expected with next major support in the range of $47,000-$51,000.
On the demand side, the capital flow still looks healthy. Enough volume is still willing to pay current prices, while whales ramped up their buying again. Current price action is still above NVT price, which suggests that current price fluctuations are still within the expected bullish territory.
Nevertheless, the demand side should be watched closely for a potential dry-up in on-chain volume over the next few days if price comes close to the NTV price.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Nothing here should be considered investment or trading advice. Past performance is not a guarantee of future results. Every investment and trading move involves risk. The author owns Bitcoin. You should conduct your own research when making a decision and/or consult with a financial advisor.
On April 14, the price of Ether (ETH) just hit an all-time high at $2,400 and although the price has increased more than three-fold since the beginning of this year, the current speculative premium suggests, there is a lot of room for upside.
Ether’s speculative premium is far from overheated
While the current price of Ether is at around $2,375, the Realized Price, meaning the average price paid by all investors who are currently holding Ether is at $802. This means that current buyers of Ether are willing to pay 2.99x the price of what all current holders have paid on average for their Ether. While this might sound high, this multiple went as high as 6 in the last bull market.
In order to derive at this multiple, the Market Value of Ether (current Ether price) is divided by the Realized Value (what all current holders paid on average for their Ether). In short, this multiple is called the MVRV ratio and was invented by David Puell and Murad Mahmudov. It could also be described as the multiple of the market’s cost basis for an asset.
In the past, the MVRV ratio served as a good signal for when the mania got out of hand, meaning when the multiple reached a value above 4, and where a value below 1 proved to be a good buying opportunity.
The MVRV ratio could rise to 5 by end of May
The following chart shows the multiple over the course of Ether’s existence. It becomes visible that it has followed an upwards trend channel since December 2019.
If this trend were to continue, and a similar MVRV ratio run-up like in the past is ahead of us and eventually a multiple of 5 could be reached by end of May. Based on the current Realized Price of $802, this would suggest a market price of Ether of $4,010 and would be a price increase of 71%.
Even better, as more buyers are coming into the market, the Realized Price is expected to rise over time. Over the past month alone, it increased by 15.1%. Projecting this to the end of May, the Realized Price could rise by 26.43% to around $1,014 per Ether. Based on a multiple of 5, this would result in a market price of $5,070 per Ether, which is an increase of 116%.
Fasten your seatbelt
This projection is a real possibility, especially with Ether and Bitcoin breaking to new all-time highs on a regular basis. There are no guarantees when it comes to price and time targets. However, there are probabilities, and according to this on-chain indicator, the upside scenario has a much better chance to play out.
$5,000 for one Ether by end of May might sound crazy now, but $2.4k also sounded crazy a year ago when Ether closed the day at $159.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Nothing here should be considered investment or trading advice. Past performance is not a guarantee of future results. Every investment and trading move involves risk. The author owns Ether. You should conduct your own research when making a decision and/or consult with a financial advisor.
For the very first time in a Bitcoin (BTC) bull market, not only long-term investors but also short-term speculators who usually add to the daily sell pressure toward the end of a market cycle have become increasingly confident of higher prices as they hold on to their Bitcoin.
This only adds to the already existing supply shock. If demand remains strong, this is a recipe for another leg up for the BTC price.
Bitcoin selling activity is declining again
Every Bitcoin bull market usually coincided with an increasing number of short-term speculators coming into the market hoping to turn a quick profit, while long-term speculators start to add sell pressure toward the second half of the market cycle to realize their profits.
One of the best on-chain indicators to see this trend unfold in each cycle is called HODL waves. Hereby, the length at which each BTC address holds Bitcoin before they are sold into the market is clustered into term buckets that are then visualized in different color bands.
For example, someone who held on to their Bitcoin for five months would fall into the 3m-6m bucket, the light orange color band. If that person decides to sell, it falls out of that bucket and would show up in the 24h-term bucket, the dark red color band.
This means, the redder the colors are in the HODL waves chart on a respective date, the more short-term turnover of Bitcoins happens. This activity is almost at its lowest during a bear market, and at its highest during a bull market, while the short-term activity tends to peak around a bull market top.
Reflecting realized value in HODL waves is critical
Since the Bitcoin price fluctuates significantly during the market cycles, and HODL waves only account for the absolute number of Bitcoins moved, this chart does not account for the total value realized on a respective day by a Bitcoin seller.
As it becomes increasingly lucrative for hodlers to take profit the higher the price rises, the HODL waves can be weighted by the realized price, which is the price at which each Bitcoin on average was last bought /sold.
This adjustment allows for visualizing the value-driven profit-taking on a daily basis through the value-adjusted colored, term buckets.
Bitcoin cycle tops tend to form around the short-term activity peak
Once HODL waves are weighted by the realized price, the Realized Cap HODL Waves are derived, a concept that was first introduced by on-chain analyst Typerbole. This adjustment reveals that the 1w-1m bucket tops coincide with every single bull market top so far.
This indicator does not only suggest that the current selling activity is not at a typical bull market peak yet, it even reveals that for the first time in Bitcoin’s bull market history this trend is declining while the price continues to rise.
This is a very unusual trend in a bull market. Assuming that the price peak has not been reached yet, this suggests that profit-seekers, whether they are short- or long-term focused, are starting to hold on to their Bitcoin again, expecting higher prices to come and by that adding to the Bitcoin supply squeeze on exchanges.
Bitcoin selling activity relative to the holding period is quite low
Rafael Schultze-Kraft, Glassnode CTO, takes a similar view by looking at long-term hodlers through Coin Days Destroyed, an indicator that shows the total holding days “destroyed” by holders selling their Bitcoin.
Based on a 3-months moving average of this indicator, the destruction has retraced to a level last seen in the summer of 2019 at times where the price peak was already reached.
Ok, this is beautiful.
Experimenting with Coin Days Destroyed: Despite $BTC prices above $50k, 3-month CDD at low levels and recently declining.
Old hands extremely strong here, HODLers showing conviction and doing what they do best.
Doesn’t look like a top to me.#Bitcoin pic.twitter.com/z8OL8Gt73E
— Rafael Schultze-Kraft (@n3ocortex) April 9, 2021
If the price was close to a bull market peak, a much higher indicator value would be expected as long-term holders would be taking profit in material size, which is currently not the case.
Bitcoin spending behavior relative to the market cap is low
When taking this concept of Coin Days Destroyed further and looking at it with respect to average value destroyed in perspective to the market capitalization, one arrives at the so-called dormancy flow. This is a concept invented by analyst and trader David Puell.
The dormancy flow describes the yearly moving average of Bitcoin holders’ spending behavior. It is based on the held value that gets destroyed in perspective to the overall accrued value in the market.
This indicator suggests, the 365-day average spending behavior of Bitcoin measured in USD is very healthy and far below prior bull market spending.
This is Bitcoin rocket fuel
Bitcoin selling activity whether it is from speculators or long-term holders is declining while also the annual spending behavior relative to the market capitalization is surprisingly low. All these on-chain data points suggest that the market is inching to an even deeper supply squeeze. This is one of the best rocket fuels to send the Bitcoin price higher.
However, this is not a guarantee as it requires continuous demand for the price to appreciate in this environment. Therefore, a close eye on high-net-worth individuals and institutions’ demand should be kept, as they have recently been the main driver on the buyer side.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Nothing here should be considered investment or trading advice. Every investment and trading move involves risk. The author owns Bitcoin. You should conduct your own research when making a decision and/or consult with a financial advisor.
Traders are increasingly checking on-chain data to “predict” both the short-term and long-term price trend of Bitcoin (BTC) using such platforms as CryptoQuant, Glassnode and WhaleAlert.
Particularly, data points such as Bitcoin exchange inflows, outflows, and stablecoin inflows are actively used by traders to anticipate where BTC may go next.
499 #BTC (29,979,163 USD) transferred from unknown wallet to #Coinbasehttps://t.co/zkhywRQS82
— Whale Alert (@whale_alert) March 14, 2021
However, this type of data should be taken with a grain of salt as large holders also realize that this data is being increasingly used by many individuals in their trading strategies. Hence, high-net-worth individuals or whales can manipulate this data to tilt the market to their advantage. But how?
Bitcoin on-chain data can be used for “psyops”
When large amounts of Bitcoin are deposited into an exchange, it typically signals that a whale or a high-net-worth investor is planning to sell BTC, at least in theory.
Investors who hold a lot of Bitcoin usually leave them in non-custodial or self-hosted wallets for privacy and security reasons.
Hence, when these holdings hit exchanges, it makes it seem like whales are about to put massive selling pressure on the market.
However, since whales know that investors can track deposits through such on-chain data tracking platforms, this aopens the door to a fakeout situation.
In technical analysis, a fakeout is a term used to refer to a situation in which a trader enters a position anticipating a future transaction signal or price movement, but the signal or movement never develops and the asset moves in the opposite direction.
For example, whales could deposit large amounts of BTC into various exchanges, make it seem like they are selling a lot of BTC, causing fear in the market to drive BTC down.
In reality, whales might not be selling the BTC deposited into exchanges at all. Instead, they may use this fakeout situation to buy the asset at a lower price, for example.
Well-known pseudonymous trader Cantering Clark explained:
“Fair to say that on-chain data and shuffling of Bitcoin from wallets to exchanges and the other way around is an abused ploy now. Do you think a huge player is going to make it known in such an open way that they plan to sell? I guess everyone still falls for the quarter trick?”
Ki Young Ju, the CEO of CryptoQuant, raised a similar point regarding what he calls “psyops” with on-chain data.
Ki noted that whales may deposit BTC to exchanges in order to shift market sentiment from greed to fear.
The negative market sentiment alone could be sufficient to drive the price down, which may also lead to cascading liquidations if the futures market is overcrowded. Ki said:
“Speculative guess, but whales might deposit a large amount of BTC into exchanges to make people scared as a lot of people follow whale alerts.”
For instance, Gemini reportedly saw large BTC deposit before Bitcoin dropped on March 15 to as low as $54,500.
At the time, Ki emphasized that while it could be sell orders, it also could be psyops to lead the market into thinking that selling pressure is coming. He explained:
“Maybe it’s one of the three: 1. Psyops 2. Gemini running a private brokerage service, executing sell orders to other exchanges. 3. Some brokerage service uses Gemini Custody, executing sell orders to other exchanges.”
According to Philip Swift, an analyst and co-founder of Decentrader:
“It can be dangerous for traders to put too much weight on the importance of transaction movements between wallets on the Bitcoin blockchain. As we have seen today, there is often confusion around who actually owns specific wallets.”
Swift further explained that “there is clearly an opportunity for ‘pysops’, where large players trick avid wallet watchers into thinking that funds are being moved ahead of being sold on the market.”
Regarding these wallet transfers Swift said:
“That is not the intention, the intention is simply to trick people into thinking the Bitcoin are about to be sold. It is important to remember that large players have many other ways to buy or sell $BTC such as OTC, unwinding futures positions, etc. They don’t have to always move their funds on-chain before buying or selling.”
Pretty accurate but no silver bullet
Nevertheless, Bitcoin deposits into exchanges have historically been a fairly accurate predictor of the direction BTC will go.
For example, in the past three weeks alone, two major spikes in BTC exchange inflow marked the local top on Feb. 22 and March 15.
Therefore, many on-chain metrics, including BTC transfers to and from exchanges, have shown to be very useful in anticipating BTC price action.
But traders should also be aware that this information is open to everyone and thus cannot be considered the silver bullet of metrics. As its popularity rises, it can be gamed by whales, the media, and other influential entities. This can ultimately mislead traders and shift sentiment to give a false picture of market conditions, particularly in the short term.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.