bitcoin seems to be hitting an air pocket. Over the past two weeks, whales have been dumping their digital assets in large amounts. This exodus, amounting to more than $1.2 billion according to CryptoQuant, has been a cause of concern for many landlocked investors.
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Where the whales go, the market can follow
The reasons for this sudden sell-off remain unclear, but analysts point to a confluence of factors. One theory suggests a shift in the priorities of miners, the brawny machines that secure the bitcoin network and earn rewards in the form of new coins.
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twitter.com/hashtag/bitcoin?src=hash&ref_src=twsrc%5Etfw” rel=”nofollow”>#bitcoin Long-term holding whales sold $1.2 billion in the last two weeks, likely through brokers.
ETF net flows are negative, with outflows of $460 million in the same period.
If this ~$1.6B in sell-side liquidity is not purchased OTC, brokers can deposit twitter.com/search?q=%24BTC&src=ctag&ref_src=twsrc%5Etfw” rel=”nofollow”>$btc to exchanges, impacting the market. pic.twitter.com/oYeKsRqKeF
– Ki Young Ju (@ki_young_ju) twitter.com/ki_young_ju/status/1803137868254343450?ref_src=twsrc%5Etfw” rel=”nofollow”>June 18, 2024
With the burgeoning artificial intelligence (ai) sector offering a potentially more lucrative gold mine, miners could be cashing in their crypto rewards to invest in the future of computing.
The appeal of ai is undeniable, shared Lucy Hu, senior analyst at crypto fund Metalpha. The large processing power required for ai development aligns perfectly with the capabilities of mining rigs. It appears that miners are strategically diversifying their sources of income.
This potential exodus of miners from the bitcoin ecosystem could have a domino effect. As miners sell their rewards, the overall supply of btc in circulation increases, which could drive the price down.
This aligns with the observed decline in “UTXO age,” a metric used to track buying and selling patterns. a fall in UTXO Age indicates greater sales activity, and that's not a comforting sign for investors hoping to ride the bitcoin wave.
Traditional markets beckon, leaving bitcoin on the beach
Adding fuel to the fire is the broader market sentiment. The recent US dollar strength and a general flight toward “safer” assets like traditional stocks have held back riskier investments like bitcoin.
This risk aversion is further reflected in thebitcoin-whos-dumping-their-coins-and-why/” target=”_blank” rel=”nofollow”> net outflows of more than $600 million of US-listed bitcoin ETFs, the worst performance since late April.
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Is this a bitcoin crash or a temporary setback?
The combined effect of these factors has been a steady decline in the price of btc. From a lofty position of $71,000 just a few weeks ago, bitcoin hasbitcoin” target=”_blank” rel=”nofollow”> submerged at just over $65,000. Some analysts warn of a possible free fall to as low as $60,000 if the tide of negative sentiment continues to flow.
Whales are dumping a ton of bitcoin. Is this a fire sale, a deep discount to buy bitcoin, or a warning sign that things are about to get tough for bitcoin? Investors are waiting to see if it is a good time to buy or if they should exit before the price drops further.
Featured image from Getty Images, chart from TradingView
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