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Bitcoin Faces Selling Pressure from Diamond Hands, But Rally May Resume Soon

According to CryptoQuant, a leading provider of on-chain data and analysis, Bitcoin is experiencing a wave of selling pressure from both sharks and whales, who are large holders of the cryptocurrency. These holders, who have accumulated substantial amounts of Bitcoin during the bull run of 2023, are now looking to cash out their profits in the exchange markets.

Sharks and Whales Dominate the Market

CryptoQuant defines sharks as holders who have between 100 and 1000 BTC in their wallets, and whales as holders who have more than 1000 BTC. These holders are considered to have a significant influence on the market, as they can move large volumes of Bitcoin in and out of exchanges.

According to CryptoQuant, the inflow of Bitcoin into centralized exchanges has increased significantly since Bitcoin reached the $49,000 price level, indicating a higher demand for liquidity and a higher intention to sell. Moreover, the inflow has been dominated by sharks and whales, who have accounted for more than 60% of the total inflow in the past week.

Source: CryptoQuant

This contrasts with the previous trend, where the inflow was mostly driven by retail investors, or shrimps, who have less than 1 BTC in their wallets. Shrimps have been the main buyers of Bitcoin in the past year, as they have taken advantage of the low prices and the increasing adoption of the cryptocurrency.

Bitcoin Correction May Be Temporary

However, CryptoQuant also suggests that the current correction of Bitcoin may be temporary, and that the rally may resume soon. The correction, which has seen Bitcoin drop below $40,000, is largely attributed to the lack of positive news from the spot ETF, which is a proposed exchange-traded fund that would track the price of Bitcoin directly, and the recent rapid rise of Bitcoin, which may have triggered some profit-taking.

Source: CryptoQuant

CryptoQuant argues that the correction is likely to continue in the first quarter of 2024, but that Bitcoin is not even close to its peak yet. The percentage of volume purchased less than three months, which measures the ratio of short-term holders to long-term holders, shows that Bitcoin is still in a relatively low range, compared to previous peaks.

This implies that the whales leading the market are not ready to end their bull run yet, and that they may resume buying Bitcoin after a period of adjustment. CryptoQuant expects that the price of Bitcoin will bounce back strongly after 1-2 months of consolidation, and that the cryptocurrency will continue to attract more investors and users in the future.

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