Some Bitcoin whales who purchased BTC in late 2018 and mid-2019 might be finally selling, on-chain data shows. But it does not necessarily mean a steep correction is coming.
Whales are individual investors that hold substantial amounts of BTC. Whales typically tend to pick areas of high liquidity to sell their holdings. As such, whales often mark the short-term top or bottom of Bitcoin.
In an exclusive interview, the researchers at Whalemap explained that the movement of funds by whales typically represents selling pressure.
Red bubbles on the whale chart appear when whales who bought at that price points move their funds. Based on the trend, the researchers noted that whales or the “smart money” have shifted.
“Red bubbles show locations at which hodlers originally held their BTC before transacting it. So imagine you bought bitcoins at the $20k peak and yesterday you decided to send them to an exchange for instance. In this scenario – red bubble at 2017 peak will appear. Bubbles also show data from yesterday – so all the HODLer transactions that are displayed in our latest tweet happened yesterday. Looking at the bubbles themselves, one way how we interpret them is that possibly whales or most likely smart money has moved,” the researchers said.
Although whales moving their holdings usually demonstrates an intent to sell, there are potential variables.
For instance, Whalemap researchers explained that whales could be involved in over-the-counter (OTC) deals or cold wallet rearrangements.
A cold wallet is an offline Bitcoin address, which both whales and normal individual investors safely store BTC. The whale data shows that whales are transferring their funds, but it is unclear whether they are moving to exchanges.
“Usually, this type of HODLer transactions are HODLer—>exchange. Sometimes though, it could be OTC deals or exchange cold wallet rearrangements Here is also a couple of tweets where we were seeing similar activity from HODLers and CryptoQuant guys were noticing weird activity happening as well. Later it turned out that it was indeed OTC deals happening (possibly could have been Microstrategy MSTR ). And yeah, smart money moving is usually bad for price,” they added.
Whales might have the appetite to sell at the current price range for several reasons.
First, whales who bought in the $4,000 to $6,500 range are massively profitable. Given the lack of BTC volatility in recent weeks, some whales might be compelled to take profit.
Second, Bitcoin has continuously rejected the same resistance level over the past two months. It has struggled to break out of the $11,000 to $12,500 resistance range, which indicates a consolidation phase.
Bitcoin underperformed in the past two fourth quarters in 2018 and 2019, and that trend is also worth considering. But, BTC is currently in a post-halving cycle, and in 2016, BTC achieved a record high 15 months after the halving.
If some whales sold, they might have been attracted to take profit after years of holding onto their BTC. If the whales did not sell, it could have been OTC deals or cold wallet arrangements.