Bitcoin (BTC) price is proving to be relatively stable at around the $16,000 level, heavily outperforming both safe-haven and risk-on assets, including gold and stocks. But in the near term, the digital asset faces a major roadblock in the form of whales.
On Nov. 12, the price of Bitcoin reached $16,199, a level not seen since the famed 2017 rally. Although BTC dropped to $15,600 within a few hours, it quickly recovered and at the time of writing it looks like the digital asset will attempt to overtake the intraday high.
The performance of Bitcoin, the S&P 500 and gold in the past week. Source: TradingView.com
Bitcoin has been shown resilience above $16,000, which has historically been a pivotal reversal point. Due to BTC surpassing this crucial area, the market sentiment around the top cryptocurrency has become overwhelmingly optimistic.
However, this could leave the cryptocurrency and wider market vulnerable to a sell-off from whales. High-net-worth individual investors who hold large amounts of BTC, described as whales, prefer to sell when there is high liquidity.
In most cases, periods with the most liquidity are when the price of BTC is increasing with significant market optimism.
On-chain data hints that a whale-induced sell-off is likely for BTC
Whales are holding more BTC than usual and there has been an increase in whale deposits to major exchanges
These two data points show that the probability of a sell-off led by whales in the near term is high.
When the Exchange Whale Ratio indicator surpasses 85%, it indicates that a correction is likely. CryptoQuant CEO Ki Young Ju explained that 85% is correction-level and 90 is dumping-level for the indicator.
Since the Exchange Whale Ratio is at around 85%, Ki said “mass-dumping” is not likely but minor corrections would likely occur.
This data coincides with the report from Santiment which found the number of large Bitcoin whales hit a yearly high.
The analysts at Santiment suggested that the number of whale Bitcoin addresses holding over 10,000 BTC hitting 111 is a validation of whale confidence.
The number of Bitcoin whale holders. Source: Santiment
While this is true, it also means that the Bitcoin market currently has an unusually highest number of whales. Hence, if whales begin to take profit, it could cause a pullback in the foreseeable future. Santiment analysts wrote:
Looking for validation that Bitcoin whales are confident in their assets? The number of addresses holding at least 10,000 $BTC has just matched a 2020 high of 111. Additionally, those with 1,000-9,999 $BTC are now just 6 below the ATH of 2,135 wallets.
The future is less bright for altcoins
Alternative cryptocurrencies (altcoins) are now in a precarious position due to Bitcoin’s current price cycle.
If Bitcoin goes up, then it would continue to suck the volume out of the cryptocurrency market. Consequently, altcoins would underperform against Bitcoin and possibly against the U.S. dollar.
Alternatively, if Bitcoin breaks down, it could rattle the market, which would lead to a major altcoin market correction. A pseudonymous cryptocurrency derivatives trader known as “CoinMamba” wrote:
I would stay away from longing any ALT here. If BTC breaks down they will go down hard. When they start moving you will have plenty of time to make good entries. So be patient my friends.