Whale Watching: Exchange Data Contained Early Warning of Thursday's Bitcoin Dump

Data on the flow of funds into exchanges suggests big investors were preparing to dump bitcoin on the market five days before Thursday’s price rout.

AccessTimeIconMar 13, 2020 at 4:35 p.m. UTC
Updated Sep 14, 2021 at 8:19 a.m. UTC

The big drop in bitcoin’s (BTC) price Thursday was in the making since March 8, data on the flow of funds into exchanges indicates.

The biggest cryptocurrency by market value collapsed from $7,900 to a 10-month low of $4,700 on Thursday and extended the decline to 12-month lows below $3,900 early Friday. 

Data provided by blockchain analysis firm CryptoQuant shows inflows into major exchanges, or deposits, began rising at higher-than-usual rate beginning March 8. One way to read this is as a possible co-ordinated action by whales to dump the cryptocurrency.

BTC inflows all exchanges
BTC inflows all exchanges
  • X-axis represents the block number, a proxy for time
  • The left side Y-axis is bitcoin's price.
  • The right side Y-axis is the number of incoming coins into all exchanges.

Coins began flowing into exchanges at a faster rate starting from block number 620.8K, mined on March 8. Prior to that block, the average inflow per transaction was about 1,000 BTC. But after that, inflows ranged from 1.500 to 6,000 BTC in the run-up to Thursday’s price drop. 

Meanwhile, the cryptocurrency’s slide began with a near 10 percent drop on March 8. In the following three days, BTC posted marginal losses – before plunging by a staggering 39 percent on Thursday

The implication is that whales – individuals, or entities, that hold large amounts of digital currencies – started moving coins from wallets to exchanges at least four days in advance of the dump. 

Binance BTC inflows
Binance BTC inflows

A similar pattern can be seen at the world’s largest exchange, Binance. Prior to 620.817K, the average inflow per block was about 100 BTC. After that point in time, inflows ranged from 130 to 1,702 BTC in almost every block.

Notably, that huge inflow of 1,702 BTC was observed in block number 620.965 when bitcoin’s price was trading near $8,000. 

Again, the data suggests big players had begun preparing for the massive liquidation since March 8.

BitMEX BTC inflows
BitMEX BTC inflows

Similarly, inflows into BitMEX fluctuated between 97 and 1,994 BTC from block numbers 620.8K to 621.3K. 

One transaction, for 1,000 BTC, was recorded in block number 621,256 when bitcoin’s price was hovering around $7,900.

Lead indicator?

It is doubtful anybody could have predicted the magnitude of the sell-off seen on Thursday. That said, the increased inflow of BTC into exchanges was a sign the big sellers were getting ready to offload their holdings, which usually translates into big price slide.

The lesson: Keeping a close eye on inflows into exchanges can help leveraged traders avoid getting trapped on the wrong side of the market.


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