The price of Bitcoin (BTC) fell sharply on November 26 following a massive sale of whales. Data from on-chain data companies, namely Santiment, Intotheblock, and CryptoQuant, shows increased levels of whale-swap entries.
Whales that were selling just below Bitcoin’s all-time high, especially when market sentiment was too euphoric, led to a massive drop. About $ 1.8 billion worth of futures contracts were wiped out, as Cointelegraph reported.
Some exchanges, like Binance for example, recorded $ 400 million in liquidations in just a few hours.
According to Santiment, the whales sold out quickly after Bitcoin surpassed $ 19,300. Many of these wealthy people have sold themselves so aggressively that they are no longer in the category of whales with over 1000 BTC.
The over-leveraged derivatives market began to collapse as soon as the price of Bitcoin experienced a relatively minor drop. Eventually, BTC fell to $ 16,200 on the major exchanges. Analysts at Santiment said:
“The $ BTC whales with 1,000 or more coins held (currently $ 16.7 million or more) sold almost immediately after the price peak of $ 19.3k two days ago. 11 of these whales sold enough to no longer fall into that category of over 1,000 pieces, as prices peaked. “
Researchers at Intotheblock Point a similar trend. The drop in the price of Bitcoin corresponds to when the whales transferred 93,000 BTC in exchanges. When the price of BTC hit its annual high, 93,000 BTC was worth $ 1.8 billion.
This decline started as soon as the whales started depositing BTC in the exchanges. More than 93,000 Bitcoin have been deposited in centralized exchanges. pic.twitter.com/ntq1yIlDeV
– in the block (@ in the block) November 27, 2020
Following the rapid collapse of the Bitcoin futures market, the outlook for Bitcoin for traders and analysts remains mixed. Some believe that BTC is heading for a deeper pullback, perhaps to the $ 13,800 support level. Others, however, claim buyers now have an incentive to take BTC above $ 18,000 to tap the cash above.
Bearish cases for Bitcoin in the short term
The short-term bearish case of Bitcoin revolves mainly around two things. First, in previous bull markets, BTC has historically fallen 30% or more before seeing a continuation of the rally. If BTC sees a similar trend, it would mean a drop of at least $ 14,500.
Second, short-term investor activity increases as the price of BTC consolidates. In the past, a peak in the number of young addresses has marked a downward trend.
Cryptocurrency trader and technical analyst Edward Morra pointed out that previous bull markets had suffered multiple even more severe corrections, say from 30% to 40%. In addition, the trader also said that the 0.618 Fibonacci sequence level is $ 13,500.
Based on the combination of these two data points, Morra explains that a drop to $ 13,500 would be a “fantastic” opportunity. he said:
“Assuming we’re in a bull market, 0.618 Fibs are generally fantastic buying opportunities. Let’s take a look at the period from mid-2015 to the end of 2017. 6 of 7 pullbacks we had at 0.618 Fib (The last pullback only went to 0.5) All the declines were 30-40%. Currently the 0.618 Fib level is around $ 13,500. It would be a fantastic buying opportunity if that was happening. We already had a mini version of it earlier this year which also corrected to 0.618 Fib. “
Josh Olszewicz, chartist and cryptocurrency investor, says local Bitcoin highs typically occur when one to three month old unspent transaction (UTXO) outflows reach 10%.
The investor Notes that it is currently at 8%, which has historically signaled a market high. He noted that “like the BDD, younger on-chain coin movements are generally bearish.”
Case of bulls in the near future
Nevertheless, market sentiment around Bitcoin remains generally bullish. Many analysts who predict a short-term BTC decline still expect the dominant cryptocurrency to hit an all-time high by the end of the year. In view of this, some traders are also bullish on the short term price trend of BTC.
A pseudonymous trader known as the “Byzantine General” Noted that liquidity for Bitcoin is now between $ 17,500 and $ 19,000. Liquidity emerges when futures market traders swing to one side of the market. Since the liquidity is higher, this indicates that traders are probably short on BTC and the over-leveraged shorts liquidation prices are around $ 18,000.
Stop cascading hunts and liquidations can work both ways. If massive long contract closeouts cause BTC to fall on November 26, short closeouts could trigger a rally in BTC. Given that BTC / USD has fallen significantly over a short period of time, a rescue rally is certainly possible. With cash close to $ 18,000, the likelihood of this happening remains high.
Former Credit Suisse banker Mira Christanto added that BTC’s medium to long term outlook remains strong. She identified the Bitcoin Difficulty Ribbon indicator, which suggests that the price of BTC has been removed for a long time. The indicator signifies an acceleration of the mining difficulty, which, as we saw in 2013 and 2016, marked the start of bullish cycles.
The biggest variable is the stability of the coin entrances
Whale swap deposits remained high throughout November, which was the main source of selling pressure. But the only variable that could offset the sale of whales is the stability of coin entries. In the latest note to clients, data analytics firm CryptoQuant said the number of stablecoins deposited on exchanges has risen sharply in recent months.
For the Bitcoin rally to continue in the short term, two main factors are critical. BTC needs to stay above the $ 16,200 support region, which it has defended so far with strong market reaction.
It should also see a higher inflow of stablecoins in the coming days, which would indicate that marginalized capital is returning to the market. The note read:
“In recent months, the quantity of stable coins deposited on the stock exchanges has increased significantly. This has resulted in lower selling pressure since the end of September and keeping it low. Currently, the selling pressure is increasing slightly, which could indicate a correction, but with the whale trading ratio remaining low, it looks like it won’t be significant. Analysts using CryptoQuants tools, looking at the long-term outlook, predict that bitcoin will reach and surpass the previous high of $ 20,000. “
At least for the foreseeable future, it is essential that BTC remains stable above $ 17,000 and consolidates. This would allow the derivatives market to see a potential pickup in momentum and open interest to develop. So far, there aren’t too many signs that a massive correction needs to happen and that the road to a new all-time high in the medium term has been blocked.
Additionally, the culmination of negative news, including the tweet thread from Coinbase CEO Brian Armstrong on U.S. regulation and Chinese police seizing $ 4.2 billion worth of BTC and other cryptocurrencies from the system Plus Token Ponzi has hit the market in recent days to fuel bearish sentiment.
However, as the impact of this negative news wears off, the fear as well as the selling pressure on Bitcoin and other cryptocurrencies may wane in the coming weeks.