The price of Bitcoin (BTC) has been under severe selling pressure by whales for the past two months as on-chain data reveals.
However, five key indicators are suggesting that major sellers are about to turn into hodlers or even accumulators of Bitcoin again while institutional demand remains high. This is an explosive setup that may send Bitcoin to new all-time highs in the near term.
Whales stopped selling
The number of whales, which are considered Bitcoin addresses with a balance equal to and more than 1,000 Bitcoin, declined by more than 10% since Feb. 8, is suggesting a large sell-off of Bitcoin.
While the price of Bitcoin managed to make two all-time highs during the two-months dumping period, the overall price rise has significantly slowed down with price finding strong resistance at around $60K. Since March 31, however, large holders of Bitcoin have stopped selling.
Typical for sell-offs before a quarter-end is portfolio rebalancing by institutions. As Bitcoin has seen a 104% price rise since the beginning of this year, this is to be expected.
Grayscale, the largest digital asset manager, announced yesterday that it has just undergone rebalancing for its digital large-cap fund at the expense of selling Bitcoin.
If rebalancing is the major driver and considering that the number of addresses holding equal or more than 1K BTC is back at levels last seen at year-end from which the significant price rise started, whales could be finished selling for now.
Long-term hodlers selling Bitcoin are slowing down
With Bitcoin breaking the 2019 high last October did not only begin one of the fastest but also one of the most prolonged increases in Coin Days Destroyed (CDD).
This on-chain metric expresses the weight at which long-term hodlers are selling. It is calculated by taking the number of coins in a transaction and multiplying it by the number of days it has been since those coins were last spent. This means the higher Coin Days Destroyed is, the more volume is sold by them.
However, since the beginning of the year, long-term hodlers selling is not only drastically slowing down but has almost come back to the level from which the sell-off got initially triggered last year.
This suggests that long-term hodlers have become increasingly confident in a higher Bitcoin price near term.
Miners have turned into Bitcoin accumulators again
As Bitcoin miners’ revenue stream is newly mined Bitcoin, they regularly have to sell their mined Bitcoin to pay for their operational expenses such as electricity costs. However, some miners tend to be speculators on price.
By holding back selling Bitcoin, they become net accumulators. This is expressed in the Miner net position change, which shows the 30D change of the supply held in miner addresses.
The last time miners were hesitant to sell their Bitcoin was right before a major price increase, which is almost three months ago. This positive change suggests that miners expect higher prices in the near future.
Institutional demand remains high
Despite material selling pressure from whales, institutional demand for Bitcoin has not slowed down. The net transfer volume of Bitcoin from/to exchanges is deep in the red, almost at a historical low, meaning that more Bitcoins are currently being withdrawn from exchanges than deposited.
This is a sign that these coins are moved to cold storage. This is typical for institutions as they tend to make long-term investments and prefer safer custody solutions than leaving them on an exchange.
The largest supply crunch of exchange balances in the history of Bitcoin has been a phenomenon since the pandemic. It has become even more material as institutions have started to accumulate in greater quantities since November 2020.
This becomes clear by the large continuous drop in the Bitcoin balance on exchanges, and particularly Coinbase, which is mostly frequented by institutions over the last few months.
Meanwhile, Coinbase released its Q1 earnings and outlook yesterday in which it states:
Assets on Platform of $223 billion, representing 11.3% crypto asset market share, includes $122 billion of Assets on Platform from Institutions. … We expect meaningful growth in 2021 driven by transaction and custody revenue given the increased institutional interest in the crypto asset class.
It does not only become certain that institutions have materially added to their revenue, but it also shows their confidence that this trend of buying is likely not going to stop soon.
Weekly ascending triangle close to a break
Since the beginning of February, a weekly ascending triangle has formed. Statistically, this chart pattern gives a higher likelihood of breaking to the upside than to the downside.
If the price were to break to the upside, the size of the triangle suggests a potential break-out target toward $79,000. While neither the break to the upside nor the price target is a certainty, it is a chart worth keeping an eye on alongside major on-chain signals.
Strong forces in the market, whether they are long-term hodlers, miners, or whales are all showing signs of confidence in an increasing price of Bitcoin.
The ascending triangle gives even more reason to believe that this move could be imminent, and to the upside. While no one would mind a $79,000 Bitcoin price in the near future, a breakdown of the triangle is also a possibility that should be taken into consideration as not all key on-chain signals have fully aligned just yet.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
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