Why are Bitcoin whales selling in Korea?

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Bitcoin (BTC) whales in South Korea have sold heavily on major exchanges over the past week. Data shows that in the past three days alone, Bithumb has seen multiple deposits of $ 100 million.

In terms of volume, South Korea has a much smaller market for cryptocurrency exchanges compared to the US. However, the South Korean cryptocurrency exchanges saw massive inflows that are comparable to other major markets.

Large inflows into exchanges typically indicate pressure to sell from whales as wealthy investors do not hold their stocks on exchanges. Therefore, when capital flows into a trading platform, it shows an intention to sell.

BTC / USDT 1-day candle chart (Binance). Source: TradingView.com

Return of the “Kimchi” award

After discovering two $ 100 million deposits made to Bithumb, Korbit posted a $ 90 million deposit on Jan. 9.

According to CryptoQuant Alerts, 2,098 BTC worth $ 84 million was deposited in Korbit at 11:42 a.m. KST.

Due to the discrepancy between the daily volume of the South Korean stock exchanges and the major US or international exchanges, inflows greater than $ 50 million are often viewed as unusually large deposits.

Data from CoinMarketCap shows that Korbit ranks 21st in the world market by daily volume, processing $ 44 million worth of trades daily.

Hence, a deposit of $ 84 million in a single day is an unusually large deposit as the exchange trades around $ 44 million per day per CoinMarketCap.

The most likely reason for the continued inflows into South Korean exchanges is arbitrage.

In December 2017, when Bitcoin topped $ 20,000 for the first time in South Korea, the dominant cryptocurrency traded around 20% higher at times in what became known as the “kimchi premium”.

Korea Premium Index. Source: CryptoQuant

In the past few weeks, Bitcoin has been trading around 5% higher on South Korean exchanges. This may have encouraged whales to broker the premium, resulting in massive inflows.

However, it is not easy to arbitrage the award in South Korea. South Korea has strict restrictions on capital that flows outside the country. Foreigners are also not allowed to trade on local cryptocurrency exchanges, which makes the challenge all the more difficult.

For the arbitrage to work efficiently, whales outside of South Korea would need to supply BTC to local traders and work as a team to achieve this.

Overall, whales exert immense pressure

On Jan. 8, Cointelegraph reported that “mega-whales” were selling large amounts of BTC when Bitcoin price first surged above $ 40,000.

Even as Bitcoin fell $ 40,000 to around $ 36,000, many large whales continued to sell aggressively, pushing the price down.

In the near future, the pattern of whales taking profits and new buyers from the US should continue to accumulate bitcoin. However, the biggest variable that could change market dynamics is the strength of the US dollar, or namely the USD Strength Index (DXY).

Analysts at Decentrader, a platform for cryptocurrency traders, said Bitcoin’s HODLing activity is increasing, which in the medium term could offset the thread of the rising dollar. He said:

Philip Swift, Bitcoin trader and creator of LookintobitcoinIn the meantime, there is a warning that the market is reaching overheated levels.

MVRV Z-Score. Source: Twitter @PositiveCrypto

While the sign of a market spike above $ 40,000 isn’t necessarily there yet, it’s nearing its peak. Swift said:

“We can see that when the z-score goes into the red zone, it signals a market spike. We’re not there yet, but a few more parabolic days for the price and we will be. I’m watching this closely.”

Swift went on to explain in comments to Cointelegraph that a major pullback becomes unlikely, although the rally may overheat.

“I think a 30% withdrawal from here is pretty unlikely,” he said. “I think the rate we’ve been up is getting to the point where BTC may need to slow down soon. As soon as Bitcoin starts to reach I think alts will snap.”