In the past three months, whales have sold nearly 150,000 BTC. Will the January crypto cold wave come back?

Over the past three months, major stakeholders have taken profits, with on-chain data showing that whale addresses with 100-10,000 BTC have sold about 150,000 BTC. As some traders' obsession with buying on dips remains high, those who believe that Bitcoin can quickly return to its all-time highs have been hit by the continued price correction.

Although Bitcoin has rebounded slightly since falling below $34,000 in late January, its price is still down 20% over the past 30 days. Ethereum has fared even worse, falling 30% over the same time frame.

Santiment data shows that Bitcoin whales - those addresses holding 100 to 10,000 BTC - have sold about 150,000 BTC in the past three months. The supply held by this group is often used as a leading indicator of where prices will go next. The supply currently held by these whale addresses has fallen to 47.31%, close to the one-year low of 47.20% in mid-May when prices fell rapidly.

NVT was bearish on BTC but turned bullish in January

Santiment’s Network Value to Transaction Volume (NVT) model measures the amount of BTC circulating on the network and then calculates whether outputs are above, equal to, or below expected circulation to justify Bitcoin’s current market cap.

The token has seen an expectedly healthy amount of movement since October 2021. When prices dropped in early January 2022, there was a lack of necessary liquidity to keep prices above $40,000. However, on average, January has presented a semi-bullish signal following some dip buying and increased activity.

FOMC Impact

On January 26, traders in a number of different industries waited with bated breath for the statement of the Federal Open Market Committee (FOMC) and whether the United States would raise interest rates and implement quantitative easing. Now it seems that interest rates will rise in about a month. The correlation between cryptocurrencies and stock markets is gradually decreasing.

Even before the FOMC meeting, Bitcoin had already started to fall. Immediately after the meeting, BTC's price was the first to start falling. For investors, the volatility and polarization of the S&P 500 index is particularly obvious, and it seems to be still in a significant decline since the Fed meeting. At the same time, gold rebounded and Bitcoin's price fluctuated. However, according to historical research by Santiment, BTC price breakouts often occur when its price is least correlated with the stock market.

The financing rates of all exchanges are negative

Starting from the third week of January, as the price of Bitcoin fell below $34,000 for the first time since July, traders began to short in large quantities. The average funding rate of perpetual contracts of multiple exchange projects is negative. Santiment calculates the average rate of Binance, Bitfinex, FTX, Deribit and dYdX through the funding rate.

Generally speaking, when a large amount of an asset is shorted, liquidations occur and major stakeholders bid up the price, using the negative funding rate as a catalyst to drive the asset higher. This is exactly what ended up happening, as on January 24th, a local bottom was created in the market (for now) and prices quickly climbed higher until many of the shorts dissipated and traders began to go long again.

Bitcoin continues to leave exchanges

Currently, the cumulative supply of Bitcoin on exchanges has dropped to 11.5%. Six months ago, the supply ratio on exchanges was 13.2%. A year ago, the supply ratio was 13.9%.

This clear downward trend in Bitcoin withdrawals from exchanges is generally an encouraging sign for the long-term prospects of continued growth in Bitcoin’s price and market cap. As the supply of assets available on exchanges decreases, this further limits sell-side pressure, mitigating the risk of significant price declines.

Traders show fear, marking January local bottom

After a prolonged period of optimism from early October to mid-December, trader sentiment towards both Bitcoin and Ethereum has fallen back into negative territory from mid-December to mid-January.

Negative sentiment among traders often indicates that prices are near a bottom, especially when sentiment falls into the red “fear zone,” as shown in the chart above.

As trader sentiment turned positive again in late January, Bitcoin and Ethereum traders once again entered the “fear zone.” For traders who remain patient amid the volatility, the number of positive return days could rise.

The average fee per transaction on the Ethereum network has fallen back in January and early February after returning to an all-time high of $62.85 on November 8. Typically, a correction in Ethereum prices occurs shortly after the fee rate exceeds the average $52 per transaction or the median $27 per transaction.

Source: Cointelegraph Consulting

Compiled and edited by Amy Liu