Bitcoin renounces recent gains: Assessing a potential whale strategy

Bitcoin gave up all its gains and crashed by 4% after gaining some momentum in the aftermath of the Grayscale win. However, with whales involved in the ongoing correction, is there more to the situation than what meets the eye?



  •  Bitcoin whales were behind the latest bear trap but leverage appetite is waning.
  •  SEC’s delayed decisions on spot BTC ETF approval waters down bullish excitement.

Bitcoin [BTC] crashed by over 4% in the last 24 hours, giving up the gains achieved after Grayscale’s legal win. A close look at the dynamics underpinning the retracement offers some insights into why it pulled back.

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The king of cryptocurrencies exchanged hands at $26,202 at the time of writing, which means it was back to trading within its previously registered bottom range. Inspecting BTC metrics revealed that the whales might be playing the market and are likely behind this recent pullback.

A classic play by the whales?

According to Bitcoin’s supply distribution metric, BTC whales holding over 10,000 BTC (denoted in blue) kicked off the accumulation on 27 August. However, they continued the selloff 24 hours later but addresses in the 1,000 to 10,000 range (in purple) started accumulating on the same day. However, their accumulation was also short-lived.

Source: Santiment

The whale activity observed in the last five days of August suggested that whales could have engaged in setting up a bull trap. Whale shakedowns are quite common especially when the market gets excited enough to attract retail and leverage traders.

Unsurprisingly, the market demonstrated a surge in bullish confidence this week. We also witnessed a surge in open interest, as well as appetite for leverage. This may have presented an opportunity for the whales to set the trap.

Source: CryptoQuant

Both the estimated leverage ratio and open interest were cut short on 29 August. The same day that BTC started giving up its short-lived gains. The cryptocurrency may have extended its downside in the last 24 hours due to an SEC-related announcement. The U.S. regulator announced on Thursday (31 August) that it would delay its decisions on Bitcoin ETF applications from multiple companies.

Many institutional, whale, and retail enthusiasts have been waiting for a spot BTC ETF to kick off a major bull rally. A delay in the announcement may have eroded some confidence in the market, hence possibly triggering some selling pressure.

Is the market close to the cycle bottom?

Bitcoin traders should note that whales have been gradually raising their holdings after every major price dip. They are already showing signs of re-accumulation, although this does not necessarily guarantee that they will avoid a further selloff.

Read about Bitcoin’s price prediction for 2024

Although there was a leveraged position shakedown, the level of liquidations was significantly low compared to its previous major liquidation just after mid-August. This could further signal that whales have less wiggle room for short-term profit-taking and may soon change to a long-term outlook.