A technical indicator that preceded the sudden Bitcoin crash in February 2020 is again showing warning signs.
Bitcoin proponents and investors (understandably) assume a “super cycle”, with certain circles predicting that the world’s largest cryptocurrency by market capitalization will reach up to $ 1 million.
However, this party could be spoiled – given a technical indicator. So Ki-Young Ju, the founder of the crypto analysis tool CryptoQuant, warns in a tweet today:
“$ BTC exchange whale ratio (72h MA) has reached 90%”
“It is the highest level since February 2020 before mass dumping. Don’t take too much leverage on your longs. Be careful.”
$ BTC Exchange whale ratio (72h MA) reached 90%.
It’s highest since Feb 2020 before the mass-dumping. Don’t take too much leverage on your longs. Be careful.
Chart 👉 https://t.co/t3orEMC7sC pic.twitter.com/vynh5ArB9I
– Ki Young Ju 주기영 (@ki_young_ju) August 10, 2021
Which tool is used for whale dumping?
According to CryptoQuant, the so-called “whale dumping” is a measure of the deposits of some of the largest Bitcoin holders – known colloquially in financial circles as “whales”.
These owners typically keep their businesses secret and their identities are often unknown. But: The tracking of the whale wallets helps to get information about what big holders of Bitcoin and other cryptocurrencies are doing and how their businesses could affect the market.
CryptoQuant uses two indicators to check how whales are dumping their coins: 1. an “All Exchanges Inflow Mean (24h MA)” tool that calculates the average amount of Bitcoin deposits at all crypto exchanges, and 2. an “Exchange Whale Ratio-Tool” that calculates the top 10 inflow transactions in relation to total inflows.
The latter indicator is supposed to show a ratio of over 85% if prices shoot up in a “fakeout” or precede a dump. In the CryptoQuant blog it says:
“In the bull market it often stays below 85%. On the other hand, in a bear market or a fake bull market for a mass crash, it usually stays above 85%. “
Where is Bitcoin now on this chart?
As the image below shows, Bitcoin’s “Exchange Whale Ratio” is currently (at the time of writing) 0.90 – which, according to CryptoQuant, indicates conditions that are ripe for “mass dumping”.
The last time the metric hit such levels, Bitcoin experienced sudden drops in price several times. In March 2020, when BTC fell below $ 4,000 for several hours, the tool hit a high of 0.90. Even in November 2018, when Bitcoin fell from over $ 6,000 to under $ 3,900, the tool stayed above 0.85.
Bitcoin is currently trading a good deal over $ 46,000 at $ 46,245 and has risen by almost 20% in the last 7 days alone. But given the resistance so far at $ 46,000 – could the whale dumping tool prove right? Only time will tell.
Proof of text: Cryptoslate
Last updated on August 11, 2021
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