Bitcoin Price Dips as Whales Slow Accumulation and Smaller Wallets Increase Buying

Bitcoin whales cease purchasing as retail investors increase buying actions

The world’s largest cryptocurrency, Bitcoin, has experienced a significant fall, sinking below the $86,000 mark at the start of the week. This sudden plunge parallels peculiar changes in Bitcoin wallet activities. Observations reveal that large investors, often referred to as ‘Bitcoin whales’, have slowed down their rate of accumulation. This behaviour is in stark contrast with smaller retail investors who have been buying more Bitcoin during recent market dips. Analysts have expressed concern over this trend, emphasizing that this pattern often symbolizes a phase in the late-cycle, characterized by increased vulnerability.

Studying trends in Bitcoin wallet activities

Onchain is a data resource that shows long-term, large-wallet holders have noticeably decreased their accumulation speed in the recent weeks. On the other hand, owners of smaller wallets, those who hold less than 1 Bitcoin, seem to have accelerated their buying spree during the recent market lows. Timothy Misir, the Head of Research at BRN, outlines that there is a glaring divergence appearing at an inconvenient time, adversely affecting the market structure. The whales are currently slowing down their purchases whilst retail investors are gathering more Bitcoins. Mr. Misir signaled this trend as a typical late-cycle pattern that heightens the short-term fragility of the market. He further elaborated that the market has not signaled any regime change, rather it indicates stress.

An unexpected liquidity crisis

The latest reports arrived shortly after most regions experienced a frantic liquidity event in the early Asian market trading hours. Bitcoin dived to approximately $85,600, wiping out around $144 billion from the total cryptocurrency market value. The past 24 hours have seen over $600 million in crypto liquidations taking place, including an estimated $567 million long positions, as per data from Coinglass. According to Misir, short-term holders’ realized losses surged during this selloff, alluding to an emotional reset within the market participants. He also pointed out that exchange balances and stablecoin inflows provide a clear indication of both the buying capacity and potential sell-side liquidity.

Full link between price pressure and Asia

The sudden overnight drop was primarily fueled by a series of bearish turn of events across Asia. For instance, hawkish comments from Bank of Japan Governor Kazuo Ueda, steered Japan’s two-year yield to 1%, increasing the likelihoods of a December rate hike. This news triggered Bitcoin’s fall from $91,000 to mid-$86,000s. Further concerns were amplified by a new frailness in China’s non-manufacturing PMI, which contracted for the first time in nearly three years, thereby deepening concerns about regional demand and global liquidity.

Interplay of flows and fundamentals

Despite this disheartening dip, some analysts choose to focus on the potential supportive macroeconomic backdrop. There are hints of U.S. quantitative easing ending, and rate-cut odds into year-end have started to rise, and global crypto investment products have witnessed $1 billion in weekly inflows after a strenuous November that saw $3.5 billion in outflows. However, the Bitcoin price has yet not reacted to these hopeful tales. As the sentiment becomes more vigilant, it remains to be seen whether Bitcoin can defend its previous lows.

Impact of US data slate on Bitcoin market

Traders are now focusing on the heavy U.S. data slate, including ISM PMIs, ADP, JOLTS, and PCE, which Misir says could determine if Monday’s drop was a capitulation or the start of a deeper phase. On the other hand, gold continues to gain interest, touching $4,261 and increasingly competing with crypto for risk capital. Misir warned traders to prepare for “violent” two-way action. To regain stability, Bitcoin needs to reclaim the low-$90Ks and see ETF and onchain flows flip decisively positive. Until then, rallies should be treated with skepticism.

Disclaimer: This article is only an informative guide and should not be used as legal, investment, financial, or other professional advice.