The price of Bitcoin (BTC) has reclaimed $15,500 on Nov. 11 after whales sold the highest amount of BTC since March. In past cycles, the dominant cryptocurrency typically rallied after a sell-off from whales.
On March 12, for instance, the All Exchanges Inflow Mean (MA7) indicator hit 3. At the time, BTC declined to as low as $3,596 on BitMEX after seeing cascading liquidations.
Since then, the MA7 has never increased above 1.7. On Nov. 11, for the first time since March, the MA7 neared 2. This indicates that whales sold a significant amount of BTC in the past few days.
Why does big Bitcoin sell-off indicate a bull trend?
Bitcoin whales, or high-net-worth individuals who hold large amounts of BTC, do not necessarily short BTC because they are bearish.
Many whales prefer to take profits amid a bull run and build up positions along the way. This is because whales trade substantially larger positions than most retail traders. As such, they seek liquidity and high buyer demand to sell or adjust their positions.
Bitcoin tends to rally after a whale-induced sell-off because it decreases selling pressure on the cryptocurrency in the short to medium term.
While the Bitcoin market has become more evenly balanced among retail traders, institutions and whales, high-net-worth individuals still impact the market.
Ki Young Ju, CEO at CryptoQuant, emphasized that Bitcoin has historically rallied after “victim whales” deposit BTC to exchanges. He wrote:
“The buy-the-dip indicator. Buy BTC when victim whales deposited to exchanges after the plunge.”
Bitcoin has seen extreme volatility in the past week, possibly as a result of whales taking profits. However, every major dip was aggressively bought up by other whales and retail investors.
BTC recorded large drops on Nov. 8, Nov. 10 and Nov. 11. Bitcoin recovered from every pullback with strength, rebounding to previous support levels within a matter of hours.
On-chain fundamentals are also highly positive
Atop the favorable technical structure of Bitcoin, on-chain fundamentals signify an overall bullish outlook.
According to Glassnode’s data, the number of active Bitcoin addresses achieved a multi-year high. Elias Simos, protocol specialist at Bison Trails, said:
“Did you know that BTC active addresses hit a multi-year high this week, and are now at Jan-2018 bubble top levels? In the chain’s entire history, it’s only been about 1.5 months that aa’s stood at >1M. How about that.”
Daily active addresses is an important on-chain metric for Bitcoin because it could indicate two key trends.
First, retail investors might be increasingly accumulating BTC and transferring to personal wallets. This shows an intent to hold Bitcoin for a prolonged period.
Second, there could be an increase in over-the-counter deals, particularly among whales and high-net-worth individuals.
The combination of positive technical and fundamental trends raises the probability of a broader rally before the end of the year. With the halving occurring just six months ago, the chances of a more sustainable uptrend remain high.