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Bitcoin whales trim their holdings as fear of “mass sell-off” looms

  • Analysts note a drop in illiquid supply ratio as dormant Bitcoins move, hold a short-term bearish outlook.
  • Bitcoin balance on exchanges spikes, largest single-day inflow since "Black Thursday," likely to trigger a mass sell-off.
  • Decrease in holdings of whales’ Bitcoin wallet addresses observed, likely meaning whales are waiting to begin accumulating.

Historically, an increase in Bitcoin inflows to exchanges – an activity being observed now – comes before a price dip. Analysts fear further consolidation in the asset before it resumes an uptrend. 

Bitcoin sell-off may have commenced with largest inflow since "Black Thursday"

On August 23, analysts observed the most significant spike in Bitcoin exchange inflow since May 2020. The event dubbed "Black Thursday" was a sudden collapse in BTC price as it nearly halved within a single day. A sudden drop in prices triggered several forced liquidations adding to the selling pressure on exchanges. 

Over the past 36 hours, inflow of Bitcoin to exchanges and net flow of Bitcoin on exchanges, both metrics indicate that the BTC wallet balance on exchanges is up. These indicators are considered a precursor of a sell-off event. 

Historically, large Bitcoin inflows to exchanges signal that large wallet addresses are gearing up to offload part of their BTC holdings and take profits. 

Dino Ibisbegovic, an analyst at Santiment, a behavior analytics platform, recently shared an update on the massive exchange inflow of BTC in a YouTube video. Ibisbegovic states:

On-chain analysts believe that spikes in exchange inflow and exchange flow balance point to a period in time where addresses are looking to claim some of their profits, reduce their exposure, and this is obviously happening right as Bitcoin broke $50,000.

Lark Davis, an independent Bitcoin analyst and YouTube content creator, shares Ibisbegovic's bearish outlook on Bitcoin. Davis tweeted:

Bitcoin's illiquid supply ratio is another top indicator that analysts consider when making a price prediction. The ratio is obtained by dividing illiquid supply (supply held dormant in Bitcoin wallet addresses by entities known to hold rather than sell) by liquid and highly liquid supply (supply owned by entities that sell on a frequent basis). A decrease in the illiquid supply ratio is indicative of increased selling from Bitcoin holders. 

William Clemente, lead insights analyst at Blockware Team, a blockchain solutions and mining company, recently commented on the drop in illiquid supply ratio and his bearish outlook. 

If whale accumulation begins again at the current price level, Bitcoin may resume its uptrend. However, it is currently unlikely since the asset failed to overcome resistance. FXStreet analysts have predicted a correction in Bitcoin's price to $47,000. 

Author

Ekta Mourya

Ekta Mourya

FXStreet

Ekta Mourya has extensive experience in fundamental and on-chain analysis, particularly focused on impact of macroeconomics and central bank policies on cryptocurrencies.

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