The price of Bitcoin (BTC) is experiencing a volatile period. After hitting $ 14,100 for the first time since 2017, it was followed by a sharp pullback. However, key on-chain data and whale clusters show that high net worth individuals are holding onto their positions.
This trend shows that whales do not expect any major retreat in the short term. Low whale activity is a positive metric after a strong upward trend. It shows that whales have no interest in selling BTC just yet and are likely to expect a wider rally.
In the short term, Bitcoin’s support areas are at $ 12,900 and $ 13,300. The stability of the dominant cryptocurrency over the two levels despite various macro factors is an optimistic trend. Elections in the United States are ongoing, and while BTC saw a 4% decline, it has been relatively resilient.
Investors appear confident
Two key on-chain indicators show that whales and retail investors are generally not actively selling Bitcoin. First, BTC’s estimated leverage ratio shows that trades in the derivatives market are not declining. This shows that investors are not proactively closing their positions or trades in the face of uncertainty over the US presidential election.
However, after the election results are published, BTC’s high estimated leverage ratio carries the risk of increased volatility. Ki Young Ju, CEO of CryptoQuant, told Cointelegraph: “The estimated leverage ratio of BTC on derivatives exchanges will increase by election day. This could lead to high volatility in the BTC price due to cascade liquidations. “
The term “cascading liquidations” refers to a situation in which futures contracts are liquidated one after the other in a short period of time. For example, if short sellers are increasingly betting against Bitcoin and the BTC price is still rising, this can result in shorts being liquidated one by one. In this case, cascading liquidations occur, which increases volatility.
Second, fewer whales are selling in the US on exchanges normally used by whales like Coinbase Pro and Gemini. According to data from CryptoQuant, bitcoin inflow into exchanges in the US is low, which means there is less risk of short-term whale sales for the foreseeable future. Ju explained:
“Whales on US spot exchanges are currently not active. The Spot Exchanges Inflow Mean is the average amount of Bitcoin deposited on the Spot Exchanges, including U.S. exchanges like Coinbase Pro, Gemini, Bittrex, and others. It is helpful to recognize the short-term risk of whale dumping. “
On October 12, for example, the inflows into US exchanges suddenly surged above the danger zone. Once it did, Bitcoin fell sharply in a short period of time. In the past two weeks, exchange rate inflows have been well below the danger zone. This reduces the likelihood of an abrupt correction in the short term.
Whale clusters show that Bitcoin is oversold
Whalemap noted that there are two technical layers in the short term that serve as important areas. Based on whale clusters, the $ 12,987 and $ 13,650 levels are critical. Whale clusters form when newly purchased BTC is left in place. Clusters show areas where whales previously bought bitcoin and are often viewed as levels of support.
Since the price of Bitcoin will be below $ 13,650 as of November 3rd, a claw back of $ 13,650 and staying above it would confirm the support level. So in the short term, it’s important for buyers to break above $ 13,650 to continue the rally. Bitcoin saw a positive technical trend over the past week by defending the $ 13,000 macro support area. As long as BTC stays above the $ 13,000-13,500 range, the short-term bull trend is intact.
On a technical level, Whalemap stated that Bitcoin’s daily chart shows that the cryptocurrency is oversold. The Relative Strength Index (RSI) is an indicator that measures Bitcoin’s momentum and whether it is overbought or oversold. On the daily candle log, the RSI shows that BTC is currently oversold, Whalemap said. “The monthly candle swept the 2019 high and closed below. Blue areas [$16,000] mean important macrofibers. I expect great people to take profits there. “
Based on the daily chart, the range of $ 13,000 to $ 14,000 is an area of interest to sellers. If Bitcoin stays stable above $ 13,000 and recaptures $ 14,000, the next resistance level is $ 16,000. Crucial to bolstering BTC’s short-term bull fall is the daily chart, which closed above $ 14,000 in November. In that case, as in December 2017, BTC could hit a new all-time high in December.
Two main variables for the short-term price development of Bitcoin
Bitcoin miners have been selling increasingly large quantities of Bitcoin since mid-October. During the rainy season in northern China, which usually begins in the fall, miners increase their capacity to benefit from cheaper electricity. Since areas like Sichuan rely on hydropower, the rainy season results in lower electricity costs. But when the rainy season comes to an end, many miners abruptly stop mining BTC.
According to ByteTree, miners have sold a lot of bitcoin over the past week. In the past seven days, there has been a negative 1,060 BTC change in mine inventory from miners, meaning miners sold 1,060 BTC more than they mined, which put significant selling pressure on the market. As a result, Bitcoin saw the second largest negative adjustment in mining difficulties in history, when miners stopped mining BTC en masse. Glassnode wrote:
“We just saw the second largest negative adjustment in #bitcoin mining difficulty level in history: -16%. It exceeded the -15.9% change in March of this year. The only other time problem was a major downward correction (-18%) over 9 years ago in October 2011. “
There is a possibility that the miners’ lower selling pressure could add to Bitcoin’s momentum. After the likely decline in miners selling BTC, the US election will have a bigger impact. Analysts, including Alex Kruger, said a Democratic Congress or the election of Joe Biden would likely boost sentiment around Bitcoin.
If Biden is chosen, Kruger said gold, bitcoin and safe haven assets would likely appreciate in value due to the significant uncertainty in the stock markets, which would require additional regulation and possibly higher tax rates.
If President Donald Trump is re-elected, it would increase the risk to assets, which could cause BTC to rise in tandem too. Barry Silbert, CEO of Grayscale – a cryptocurrency investment firm – said both a Trump and a Biden win would go to Bitcoin.