Bitcoin's sharp rise and fall are all controlled by "big whales"? On-chain data reveals the truth

Author: Odaily Planet & Chain.info

Produced by: Odaily Planet Daily

In May this year, Bitcoin is about to usher in its third halving. The price has been rising again and again recently, breaking through the 10,000 US dollar mark and approaching 10,500 US dollars. It quickly corrected this weekend and fell below 9,700 US dollars. It has fluctuated between 9,500 and 9,900 US dollars in the past two days. The price was quoted at 9,677 US dollars as of press time.

Despite a slight correction, there is not much panic in the industry. After all, "the halving dividend is coming" has become an industry consensus.

However, many people believe that the so-called "halving bonus" is just a weight used by market makers to manipulate the market, and that sharp price spikes and short-term declines are the result of human manipulation.

For example, when the BTC price was $9,000, Joe007, one of the well-known "whales", said that this round of rise was manipulated by false buy walls and false orders, that is, some "whales" issued false orders to guide others to buy, thereby pushing up the price of Bitcoin.

Interestingly, some traders have suggested that Joe007 was one of the reasons for the rapid pullback in Bitcoin prices on January 15, and Bitfinex CTO Paolo Ardoino also agreed on Twitter. This view is that as the sell wall was removed, the price of Bitcoin fell, and Joe007 took advantage of the scarcity of orders over the weekend to push the price of Bitcoin down to below $10,000.

(Note from Odaily Planet Daily: Buy wall refers to a trading diagram formed when market participants buy a large amount of a certain asset at a single price, which aims to prevent the market price from falling. Sell wall aims to prevent prices from rising.)

So, is the price trend of Bitcoin really being controlled by whales?

In response to the above issues, Odaily Planet Daily and Chain.info conducted a study based on on-chain data and found that there is a lack of evidence to support the claim that "big whales" manipulate coin prices. On the contrary, according to the data, most of these "big whales" are currently watching the market, while "small whales" are busy hoarding coins.

"Big whales" wait and see, while "small whales" continue to hoard coins

Theoretically, if you have the BTC block data of a full node, you can restore the transfer history of the entire network every hour since the birth of the first block in 2009. However, more than 200G of data is obviously not easy to handle, and many retail investors have never used the on-chain transfer function of Bitcoin except for depositing and withdrawing funds or transferring assets between exchanges.

So, what does it mean when a large amount of money is transferred on the Bitcoin blockchain network? According to the summary of Odaily Planet Daily, there are mainly four possibilities:

• A large amount of funds bought a large amount of BTC at one time (but this also means that the original large holders sold a large amount of BTC at one time);

• Exchanges organize accounts (more common);

• Large investors transfer BTC to exchanges to cash out (which also means the market faces the risk of a market crash);

• The banker spends a few dollars to transfer an account to scare retail investors and takes the opportunity to absorb funds (the possibility is low).

According to the on-chain data provided by Chain.info, we found that neither the number of large on-chain transfers (greater than 50 BTC) nor the total amount of on-chain transfers has increased significantly in the past ten weeks.

The daily transaction volume on the chain has rebounded slightly if denominated in US dollars, while large transfers have remained almost unchanged (the large transfers on February 6th came from a single entity and were accidental. After removing this accidental factor, the total amount of large transfers on that day was approximately 45,000 BTC).

This shows that the "whales" who hold a large number of coins are still waiting for the market to develop and have not taken any action due to recent market changes.

Source: Chain.info

Source: Chain.info

In addition, according to the latest report from the crypto exchange Kraken, medium-sized "whales" holding 100 to 1,000 bitcoins are hoarding more bitcoins.

The report analysis points out that the growth of the number of "whale" (large Bitcoin holders) addresses has stagnated since January 3, 2020. In January, people who held more than 100 Bitcoins took a "wait-and-see attitude" on whether to continue hoarding Bitcoins. At the same time, "small whales" with 10 to 100 Bitcoins continued to hoard Bitcoins.

Source: Kraken

In February, when the price of Bitcoin was about to break through the $10,000 mark, the number of "whales" holding 100 to 1,000 Bitcoins surged. That is, the sentiment of the "small whales" who previously held 10 to 100 Bitcoins during the coin hoarding stage continued to the "whales" who held 100 to 1,000 Bitcoins in the later period.

Kraken analyzed, “Similarly, this also means that the above-mentioned hoarding sentiment will immediately resonate with the ‘whales’ holding 1,000 to 10,000 bitcoins, allowing them to enter a new hoarding phase.”

The continued accumulation of coins by “whales” shows that people are using Bitcoin as a store of value asset. The rise in the price of Bitcoin from $3,120 in December 2018 to just over $10,000 in February 2020 further illustrates people’s increased exposure to this alternative asset.

Just last month, blockchain data analysis company Glassnodes pointed out that retail investors also have similar "hoarding" sentiment. Glassnodes said that since the formation of the bottom range of Bitcoin prices in 2018, the number of addresses with balances between 0.1 and 1 Bitcoin has risen by 10%.

Today, major HODLers are experiencing a similar shift in sentiment as hopes mount that Bitcoin’s price rally will continue into 2020.

However, Kraken predicts that the above-mentioned hoarding behavior will end in the next few weeks or months, and the volatility of Bitcoin prices will reappear. This dynamic change of "hoarding first and then volatility" will further absorb market liquidity, causing a market situation where supply exceeds demand in the future, thereby promoting a new round of Bitcoin price increases.

Top exchanges have a significant lead in new BTC users

Is there more data to support the entry of retail investors?

However, we found that driven by the halving, recent exchange user data and BTC network computing power have performed well, and the leading exchanges have a significant leading advantage in new BTC users.

Source: Chain.info

Judging from the number of newly added BTC deposit addresses, Coinbase added 1,271 more BTC deposit addresses in January than the second and third place Binance and Huobi combined, making it the absolute winner. However, since Coinbase deposit addresses can be changed, this number may be slightly higher than the actual value.

Judging from the proportion of newly added deposit addresses to total deposit addresses ("growth rate"), among the top six, except for Binance which is less than 10%, the other five are in the range of 12% to 17.3%, with little difference. Huobi had the highest growth rate of newly added deposit addresses in January, followed by OKEx.

Although the number of newly added BTC deposit addresses of OKEx is not as high as the top three, it still has an advantage in terms of growth rate. This also shows that among the top exchanges, there are still obvious differences in target users, user usage habits, etc.

Source: Chain.info

The data of active deposit addresses ("active users") in January further confirmed the pattern of newly added deposit addresses. The "active deposit addresses" here refer to the deposit addresses of exchanges that existed before January this year, which can be regarded as the activity of "old users".

Source: Chain.info

From the list, we can see that although the top three have changed positions, Binance, Huobi, and Coinbase are still in the top three. And because Coinbase's deposit address can be changed, the activity of its existing addresses is not high. Similar to the user growth rate, the activity of old users of Huobi and OKEx is also outstanding, far higher than other exchanges.

Source: Chain.info

The changes in BTC balances on different exchanges vary greatly. Most exchanges were in a state of net BTC outflow in January. Chain.info speculates that most of the funds flowing out of these exchanges flowed into a few exchanges that were experiencing inflows, proving the strengthening of the head effect from another perspective.

Source: Chain.info

Judging from the on-chain balance, the winners in January are undoubtedly OKEx and Huobi. The on-chain BTC balances of these two exchanges increased by 27,469.9 BTC and 22,841.65 BTC respectively in January.

The on-chain balance of Coinbase, which ranked third, only increased by less than 4,000 BTC, and the remaining exchanges on the list were all in a net outflow state.

Overall, the biggest winner of the competition among exchanges in January this year is likely to be Huobi. Judging from the number and growth rate of new deposit addresses, the activity of existing users, and the change in on-chain balance, Huobi is in the top three. Binance and Coinbase have advantages in the number of users and the number of growth, but the activity of existing users is average, and the new users have not brought about an increase in on-chain balance, which may mean that the average deposit amount of users is not large. OKEx has a smaller user base, but has certain advantages in user loyalty and average net worth.

Bitcoin market outlook: There is still a risk of a short-term correction, but the long-term benefits are still there

Although there are small whales actively hoarding coins and exchanges are showing positive signs of retail investors entering the market, in the short term, will Bitcoin's correction end quickly and return to the upward trend?

Odaily Planet Daily reminds investors that judging from the current on-chain data, BTC still faces the risk of a pullback in the short term.

Generally speaking, a larger amount of large transfers on the chain is a strong bullish signal in statistics. The larger this value is, the more active the BTC value network is. According to Metcalfe's Law (Note: the value of a network is equal to the square of the number of nodes in the network, and the value of the network is proportional to the square of the number of users connected to the network), the higher the value of the network is, the higher the BTC market should rise in the future.

According to the above chart of large on-chain transfers (greater than 50 BTC) and the total on-chain transfers in the past ten weeks, we find that there has been no concentrated large-value on-chain transfer phenomenon recently, which to a certain extent reflects the current lack of upward momentum in the market and there is still a risk of decline in the short term.

However, in the long run, BTC still has some positive factors that have not yet been fully released, and there is a high possibility that it will be pushed up again.

According to a report from the exchange Kraken, small and medium-sized Bitcoin "whales" are busy hoarding coins at this time, and this situation will end in the next few weeks or months. This action has not yet affected the current market price.

The "whales" behavior of "hoarding coins first and then fluctuating" will further absorb market liquidity, leading to a supply-demand imbalance in the market, thereby pushing the price of Bitcoin to a new high in the next few weeks or months.