Don't assume large amounts of Bitcoin moving wallets automatically means that a Whale is selling
In bear markets like the one currently engulfing crypto, people are often looking at reasons and signs to continue to panic. When large volumes of Bitcoin are moved, particularly from older wallets, the assumption is often these wallets are priming Bitcoin to sell them after years of HODLing. Imaginations run wild and people will think crypto OGs are losing faith.
However, the reality is way less helpful to the FUD narratives. In many (if not most) cases, it's simply a function of transaction fees being extremely low right now and it's a great time to move crypto funds for the sake of organization or redistribution for security measures. It also represents a chance to move from legacy to SegWit addresses.
The most recent example in early December when over 60,000 Bitcoins were moved from address 1PnMfRF2enSZnR6JSexxBHuQnxG8Vo5FVK. Several similar transactions took place within the span of a few days, actually totaling nearly $3B of BTC in the span of about 1 week.
What alarmed people even more was that this was an early address, once the ninth Bitcoin address. It was also confusing and alarming some people that the balance was being split evenly into addresses of 100 BTC.
But with a little digging, several online posters correctly assigned the large transactions to Coinbase, the timing of which coincided with a statement they made ahead of the move:
“In the next seven days, Coinbase will perform regular maintenance on our platform, which may result in the movement of all blockchains (assets) supported by Coinbase. These activities are controlled and closely monitored, with the aim of Provide better security for our customers…”
The next time you spot a significant amount of Bitcoin being moved, ask yourself a few simple questions:
- Are the destinations of the transactions addresses linked to exchanges? If so, it's very unlikely that a whale would sell that much Bitcoin on anything but an OTC (over the counter) transaction. Sending that much Bitcoin to an exchange would incur more fees and could also have a damaging negative effect on the price with huge sell wall optic - something they would not want to do if selling.
- Is there a pattern in the distribution of Bitcoin (i.e. evenly distributed increments to addresses)? If so, this is likely more of an exercise of organization or movement for security vs. an intent to sell.
- Finally, watch for anomalies that go against previous patterns of the top 100 Richest Bitcoin Addresses on https://bitinfocharts.com/top-100-richest-bitcoin-addresses.html