On-Chain Data Shows Bitcoin Whales Are Actively Selling Off, Is Trouble Brewing?

A new metric from on-chain data analysts Glassnode looks at the relative size of entities that actively accumulate or distribute coins in terms of their Bitcoin holdings. In short, the “Accumulation Trend Score” measures the activity of the whales.

The current accumulation trend score shows that whales are activity distribution tokens, suggesting a low probability of reversing the recent price drop, if this pattern persists.

Since November, Bitcoin has been trending lower, having reached a high of $69,000. A break in the downtrend occurred in early February, but $BTC has been moving sideways ever since, hitting a low of $34,300 during this period.

This state of limbo has divided opinion on whether or not we are in a bear market. However, in a context of economic uncertainty, sentiment is leaning towards the former.

Today’s price action sees a 3% gain accompanied by a rally in the Relative Strength Index (RSI), to 46% at the time of writing. Although this shifts momentum towards overbought territory, it remains to be seen if the bulls can break the downtrend momentum.

Source: BTCUSD on TradingView.com

Based on the data, with the whales in a distribution phase, signs point to further range, if not price decline from here.

What is the accumulation trend score?

The accumulation trend score represents the size of the entities balance (their participation score) and the number of new coins acquired/sold during the last month (their balance change score).

The score falls on a scale of 0 to 1. A score closer to 0 means that the largest entities are distributing in balance, not accumulating, while a score closer to 1 shows that the largest entities are accumulating, not distributing. .

However, a score of 1 does not necessarily correlate with a price increase or vice versa. For example, in mid-April 2021, the price of $BTC reached a high of $65,000 (the highest price in 2021). But the accumulation trend score was hovering on the lower end, with April 4, 2021 showing a score of 0.

The beginning of 2022 opened with a score of around 0.7, indicating that the whales were mostly hoarding. The current score is 0.027, which shows a complete change in sentiment.

Source: studio.glassnode.com

Small fish are taking over Bitcoin

On-chain analyst data Echoinometry supports the view that the whales are selling. However, his analysis also included examining what the “little fish” are doing, and unlike the whales, retail investors are currently buying Bitcoin.

They conclude that the probability of a higher movement is low given that the whales are out of the picture.

“#bitcoin whales and small fish…two different worlds right now. the little fish accumulate like there is no tomorrow while the whales they are distributing. Without the whales, I doubt there will be enough momentum for a sustained uptrend.”

The FOMC meeting will take place next Tuesday or Wednesday. Analysts expect US interest rates to rise between 0.25% and 0.5%. While some say this will have little impact on rising inflation, the Fed must also consider the effect of raising rates too high.

All eyes are on what the Fed will do next.