Bitcoin’s euphoria turned into panic in the last 24 hours. Signs of a collapse began to appear over the weekend when Bitcoin failed to hold the crucial $38.8k mark.
What followed was a drop of over 20 percent in just a single day.
The cryptocurrency fell from an all-time high near $42,000 to a low of around $30,000. Some who have been active in the crypto market for some time have already suspected that this crash was triggered by whales to take profits, but also to force „weak hands“ to sell their Bitcoin in a panic.
Recent data supports such an action. But what is new is data that shows that the price specifically on one crypto exchange, was far below the average market price.
Bitcoin selloff triggered by whale sales
Bitcoin wallet data from on-chain firm Glassnode shows whales buying the dip in Bitcoin.
As noted by Bison Trails Co analyst Elias Simos, the number of addresses with more than 1,000 bitcoin grew by 4%, from 2,261 at the beginning of last December, to 2,352 as of today.
Conversely, there was the largest relative decrease in the number of wallets with less than 0.01 BTC. This supports @TraderKoz’s suggestion that newcomers and smaller investors are feeling the most pain right now, and have been selling their Bitcoins on the market in the course of the last 24 hours.
Addresses with more than 1k $BTC continue growing at the expense of all others-even as this most recent downturn is taking effect.
While you were selling, whales were gobbling up your Bitcoin…. pic.twitter.com/cWszH3W9um
– Elias Simos (@eliasimos) January 11, 2021
Luca Cosentino, however, criticized the validity of Simos‘ conclusion. He pointed out that whales can divide their stocks into smaller wallets. Therefore, the hypothesis that the category below 0.01 BTC refers only to small investors is doubtful.
„Custodians hold funds for their clients. Having many funds is often a sign that this address does not belong to a whale (whales often split into multiple addresses).“
Still, there’s no such doubt about the whales‘ appetite to amass more Bitcoin.
What does Coinbase have to do with the selloff?
That whales often manipulate the exchange rate should be well known by now. With such a dump, they can „relatively easily“ cause panic and further increase their number of Bitcoins at cheaper prices. But what is somewhat shocking is the data from Willy Woo, which shows that trading activity on Coinbase may have played a crucial role.
Spot market sell off started around $38k, then Coinbase partially failed, not registering buys, causing its price to go $350 lower than others, this pulled down the index price that futures exchanges use to calculate leverage funding, wrecking bearish havoc on speculative markets
– Willy Woo (@woonomic) January 11, 2021
As mentioned earlier, the sell-off started at around $38,800 when access was restricted on Coinbase, which has been the case more frequently in recent days. Users reported that it was not possible to log in to Coinbase to place buy orders. This briefly led to a price that was $350 lower than the average market price. Some Twitter users even report prices that traded more than $1,000 below the market price.
This, of course, affects the entire index and pulls the market down extremely. Especially in the last days, users of the American stock exchange report frequent downs and that they had no possibility to trade accordingly in the volatile crypto market.
Unlike previous crashes in the past 2 years, where over-leveraged markets lead by trader liquidation, this one started on spot markets, then was greatly amplified by a single exchange partially failing, yet did not turn itself off for the good of the ecosystem,
– Willy Woo (@woonomic) January 11, 2021
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Where do we go from here?
The Bitcoin price has recovered from the lows at $30,000 and is now trading at $35,300. It looks like the local low has been reached at the moment. This could mean that the bulls are taking over again. Also, don’t be thrown off by such a setback, as trader Whittemore shows there were a total of six such „crashes“ of more than 28% in the 2017 bull run.