Whale Watching: Exchange Data Contained Early Warning of Thursday's Bitcoin Dump
Data on the flow of funds into exchanges suggests big investors were preparing to dump bitcoin on the market five days before Thursday’s price rout.
The big drop in bitcoin’s (BTC) price Thursday was in the making since March 8, data on the flow of funds into exchanges indicates.
The biggest cryptocurrency by market value collapsed from $7,900 to a 10-month low of $4,700 on Thursday and extended the decline to 12-month lows below $3,900 early Friday.
Data provided by blockchain analysis firm CryptoQuant shows inflows into major exchanges, or deposits, began rising at higher-than-usual rate beginning March 8. One way to read this is as a possible co-ordinated action by whales to dump the cryptocurrency.
- X-axis represents the block number, a proxy for time
- The left side Y-axis is bitcoin's price.
- The right side Y-axis is the number of incoming coins into all exchanges.
Coins began flowing into exchanges at a faster rate starting from block number 620.8K, mined on March 8. Prior to that block, the average inflow per transaction was about 1,000 BTC. But after that, inflows ranged from 1.500 to 6,000 BTC in the run-up to Thursday’s price drop.
Meanwhile, the cryptocurrency’s slide began with a near 10 percent drop on March 8. In the following three days, BTC posted marginal losses – before plunging by a staggering 39 percent on Thursday
The implication is that whales – individuals, or entities, that hold large amounts of digital currencies – started moving coins from wallets to exchanges at least four days in advance of the dump.
A similar pattern can be seen at the world’s largest exchange, Binance. Prior to 620.817K, the average inflow per block was about 100 BTC. After that point in time, inflows ranged from 130 to 1,702 BTC in almost every block.
Notably, that huge inflow of 1,702 BTC was observed in block number 620.965 when bitcoin’s price was trading near $8,000.
Again, the data suggests big players had begun preparing for the massive liquidation since March 8.
Similarly, inflows into BitMEX fluctuated between 97 and 1,994 BTC from block numbers 620.8K to 621.3K.
One transaction, for 1,000 BTC, was recorded in block number 621,256 when bitcoin’s price was hovering around $7,900.
It is doubtful anybody could have predicted the magnitude of the sell-off seen on Thursday. That said, the increased inflow of BTC into exchanges was a sign the big sellers were getting ready to offload their holdings, which usually translates into big price slide.
The lesson: Keeping a close eye on inflows into exchanges can help leveraged traders avoid getting trapped on the wrong side of the market.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.