The data suggests that Bitcoin’s price declines at each new record high are the result of „mega whales“ selling.
According to analysts at Material Indicators, a firm that analyzes cryptocurrencies, heavy selling occurred when Bitcoin reached $40,000 on Jan. 7.
This led to a rapid 10% drop to the $36,000 range over the next few hours.
Bitcoin volatility increases as whales sell at each new high and Bitcoin Evolution has regained the $40,000 level as support, but with momentum toward a new all-time high, the possibility of another sharp reckoning is approaching.
The drop was quickly bought and drove the price to over $41,000 in the next 12 hours. However, BTC experienced another big drop after setting another historical record at $42,000, and at the time of writing, the highest-valued digital asset is trading at $40,800. According to material indicators:
„So it looks like the mega whales started selling after this dump around 2:00am UTC and continued selling at the tops. My guess is that they were expecting more downside. They didn’t really participate in the rally at 42k, which would help even more at this point.“
In the recent drop from $42k to $40k, Material Indicators analysts explained that the smaller whales holding $100k to $1 million have started to turn a profit. They observed:
„But now they have started buying again. Probably to break the 42k resistance. Only this time it seems that the normal whales (class 100,000 to 1 million) started to profit. ”
Considering that the bitcoin price traded higher at times on Coinbase last week, it is clear that there is a lot of demand for purchases from the US.
This suggests that there is a battle going on in the US market between normal whales making a profit and new buyers. The strong rejection of any new historical record also signals that whales may profit aggressively once Bitcoin hits a new record.
Therefore, it is important that demand for Bitcoin from the U.S. is sustained in the short term. Otherwise, the high selling pressure from the whales could cause BTC to experience a correction in the near future.
Where could Bitcoin go from here?
Bitcoin currently has extremely strong technical upside, which continues to drive the price higher. Because of this, traders are reluctant to sell short, but some have started to take profits.
In the short term, one concern for bitcoin is the potential recovery of the U.S. dollar. A trader with the alias „Cantering Clark“ has recognized the recovery of the U.S. dollar and the decline of precious metals. He said:
„So the question is, after $DXY finds a surprise bottom and metals get blasted, will $BTC hold up well?“
The US Dollar Index (DXY) is moving at a support level on the monthly chart. Alternative stores of value like bitcoin and gold are priced against the dollar. So if the USD starts to move higher, the risk of a correction in BTC could intensify.