Young & Ruthless Whales Taking Profit Following Elon Musk-FUD

After going through the massive market volatility in the last couple of days (10K drop/rebound in one day!), it's time to discuss the situation from an on-chain data analyst's point of view.

Comparing the Spent Output Age Bands #SOAB of 1-3 year age bands (Fig. 1) with 1-6 month age bands (Fig. 2), through the last week's drop, we can observe the whales behind the recent dumping (47-> 30K) were the ones that accumulated their bitcoins 3-6 months ago at (20->40K). This behaviour was different when the market corrected from 42->28K back in Jan 2021. In that period, the whales owning 1-3 years old coins were primarily involved in dumping.

Figure 01 - 02

This conclusion can also be confirmed by investigating the Average Dormancy of moving coins. As you can see in Fig. 3, the daily-averaged dormancy of the moving coins through recent price correction was significantly lower than the 90DMA trend, whereas the earlier correction was mainly due to selling pressure by older coins (dormancy > 90DMA).

Figure 03

Looking at the Realized Cap Hold Waves (1-3 & 3-6 months) Fig.4, there is a unique variation in the behaviour of experienced players & mid-term traders in this cycle compared with 2017's bull run. In contrast to the three mid-term accumulation/distribution waves pattern in 2017 and 2013's bull run, we are witnessing that these players have no intention to dump a significant portion of their coins like 2017; instead, they patiently held on to their satoshi during the recent massive correction.

Figure 04

All in all, the overall percentage of the total supply held by long-term holders (1-3 years) and experienced traders (1-6 months) together, even after the recent correction, is almost 40% which is significantly higher than 15% at the end of 2017's bull run, Fig 5. Another exceptional characteristic of this cycle is the re-accumulation phase that is initiated by these big players since 42K. This could be a bullish sign in the long term if we consider the fact that this re-accumulation was traditionally started after the market crash in the last two cycles.

Figure 05

One of the triggers for the recent market sell-off was Elon Musk's tweet about Tesla's decision to no longer accept bitcoin payment. This tweet caused some fear in the market and (in my opinion) gave the opportunity to market makers to manipulate the weak-hands to sell at loss. However, this story could be narrated differently if we acknowledge that since Tesla announced a 1.5B investment in the market, there have been 10 single days with +1.5B liquidation just in the derivative market! My take is that #bitcoin is much stronger than Elon's share in the market and he is holding onto his coins, Fig. 6.

Figure 06

Last but not least, it would beneficial if we discuss two circulating on-chain metrics in social media that could cause a misunderstanding if not used cautiously. First, the decreasing number of addresses that holding +1K & +10K BTC is interpreted as a sign of the market's imminent crash. However, like 2017's cycle, this downtrend has initiated at the beginning of the bull market and usually lasted till the end of the bullish phase, Fig. 7. Therefore, if we decide to cash out based on this individual metric, we must stay out of the whole bull run !!!

Figure 07

Another metric that has been repeatedly broadcasted in social media is the fluctuation in exchanges' net flows. The truth is that we need more additional information to assess this metric on a short-term basis. The possible outcome from this data would be to estimate the distribution/accumulating phase of the market on a macro scale. Looking at the bi-weekly exponential moving average of exchanges' total net flow has shown multiple waves of high-volume deposition onto exchanges in the distribution phase in the previous cycle. In the current cycle, we are experiencing the first incoming wave of coins into exchanges while the price is discovering a base level, Fig. 8.

Figure 08


1- The Elon Musk-caused-FUD has been exploited by different kinds of whales that are now holding 3-6-month-old coins, and use a small portion of their assets to manipulate the market (unlike 2017)

2- Tracking the number of addresses that are holding a large volume of coins is not helpful, individually

3- Similarly, the net flow volume to the exchanges (whales alerts on social media platforms) is meaningless in short time frames. To some extent, this metric has become a tool in the hand of market makers to manipulate weak hands.

4- Despite the short-term possible volatility, the overall trend still has bullish characteristics. Moreover, the recent drop can be interpreted as an expected correction in a bull market that has prevented the market from overheating (MVRV, S2F, Pulle Multiple and NVT terms are all pointing to buy opportunity)