On September 4, the price of Bitcoin (BTC) suffered a sharp 10% loss. Following the contraction, the crypto market climate became visibly cautious, while the Cryptocurrency Fear & Greed Index reported „fear“ for the first time since July.
Despite this, market data suggests that whales are preparing to accumulate Bitcoin at the $8,800 support level, so a replica of the collapse seen on March 13, when BTC dropped to $3,600 seems unlikely.
How do you explain the drop in Bitcoin, and why are the whales ready to buy?
Analysts attribute the Bitcoin correction mainly to the sell-off by the miners. Prior to the drop, the analyst company CryptoQuant reported that the mining pools were preparing to sell BTC.
After tracking the outflows from the main pools, the data shows that the miners moved unusually large amounts of Bitcoin to the exchanges. A little later, the price of Bitcoin began to fall, eventually falling below the $10,000 level. The researchers explained:
„Since yesterday, miners have been moving unusually large amounts of #BTC. #Poolin, #Slush, #HaoBTC have taken Bitcoin from the mining wallets and sent some of it to the exchanges“.
When the Bitcoin trend begins to chart a reversal, it tends to extend to the farthest level of support or resistance. On March 13, for example, BTC experienced a rapid collapse to $3,600 followed by a significant rebound. From April to September, Bitcoin recovered from $3,600 to over $12,000.
Therefore, perhaps whales expect Bitcoin to reach lower levels of support, including $8,800.
„It’s good to see you again, Bitfinex whales,“ commented today on-chain analyst Cole Garner. „Smart money has ready purchase orders at $8,800. I think the minimum will probably be in that area.“
The data may indicate that the whales are expecting an additional pullback in the short term, although the movement will not be as large as the huge corrections marked by Bitcoin in the past.
Since March, the price of Bitcoin has increased by 247%. As a result, probably the recent correction has not come as a surprise to many traders. As reported yesterday, Raoul Pal, CEO of Global Macro Investor, said that 25%-40% pullbacks in a bull market are typical for Bitcoin:
„In post-halving bullish cycles, Bitcoin Investor can often sustain losses of 25% (even over 40% in 2017), confusing short-term traders (or giving swing traders short opportunities). All past scenarios have proved to be a buying opportunity. Opportunities of dollar-cost averaging on the horizon?“