On-Chain data shows that the whale ratio of the Bitcoin exchange has recently experienced a significant decline. This article will explain why this could be positive for the asset’s price.
The exchange whale ratio measures the ratio between the sum of the ten largest Bitcoin transactions on exchanges and the total exchange inflow. Generally, these ten largest transactions come from whale entities, allowing us to compare their inflows to that of the overall market.
When the value of this ratio is high, it means that whales currently make up a significant portion of the total inflows. As one of the main reasons investors deposit to exchanges is for selling purposes, this could be an indication that this cohort is potentially participating in mass dumping.
On the other hand, low values of the indicator suggest that whales currently have a relatively large share of the inflows. As these major investors do not sell significantly more than the rest of the market during such periods, the price of the cryptocurrency may experience an upward effect.
In recent months, the 72-hour Simple Moving Average (SMA) of the Bitcoin exchange whale ratio has experienced a significant decline. This suggests that whale activity has decreased compared to the rest of the market. Prior to this decline, the indicator had been on an overall upward trend since March, indicating that these large investors may be gradually increasing their sales.
During the time when the asset’s price was under pressure, the ratio had risen to around 0.88, meaning that around 88% of the total exchange inflows came solely from this cohort. However, after the recent sharp decline, the 72-hour SMA of the Bitcoin exchange whale ratio has dropped to around 0.80. Interestingly, this decline in the indicator occurred while the coin experienced a strong recovery, pushing the price above the $30,000 mark.
In these periods, whales typically increase their sales to some extent as some of these major investors may be attracted by the opportunity for profit-taking. However, as this has not yet occurred, it could be a sign that these holders believe that there is more rally ahead.
The chart also shows that the indicator experienced a sharp decline after the FTX crash, which allowed the cryptocurrency to reach its low point and eventually build towards a rally. The currently relatively low selling pressure from whales could potentially result in a similar increase in the price of the cryptocurrency if the indicator continues to remain at these low levels in the near future.
At the time of writing this article, Bitcoin is trading at around $30,400, representing a 15% increase in the past week.
Overall, the decline in the whale ratio of the Bitcoin exchange could be a positive sign for the asset’s price. With whales currently holding a relatively smaller share of the inflows, it suggests that the selling pressure has decreased, potentially allowing for a price increase in the cryptocurrency.
