After a swift initial recovery, Bitcoin seems to be losing momentum. The cryptocurrency met resistance as it approached the $40,000 mark and not even two major news events were able to propel it through that wall.
At the time of writing, BTC trades at $37,663 with sideways movement in the lower timeframes. In higher timeframes, the first cryptocurrency by market cap records a 13.6% and 24.6% correction in the 7-day and monthly chart, respectively.
This was one of BTC’s most brutal sell-off. The correction caused the price to drop from around $60,000 to current levels. Most people believe it was caused by Tesla’s CEO, Elon Musk, tweets on Bitcoin’s alleged environmental footprint.
Although a catalyzer, on-chain data indicates otherwise. A report by Arcane Research shows that Bitcoin’s daily spot volume increased to an all-time high on May 19th during the sell-off. The research estimates that around $35 billion were traded in that period. This data suggest that spot traders have an important role in the sell-off. Arcana Research adds:
The volume record resulted from heavy offloading as the market crashed and whales were buying the dip. Coinbase alone processed almost 2 million trades on May 19th (…).
As analyst William Clemente specified, most of the selling was conducted by spot buyers with coins acquired during this bullish circle. Therefore, coins bought during December and April 2021, when Bitcoin reached an average price of $35,000, $45,000, and $60,000.
Who Was Behind Bitcoin Sell-Off?
Analyst Ben Lilly made a more detailed breakdown of the sell-off. The analyst points to whales, miners, and other market movers for this event. This “trifecta” of actors contributes to triggered past day events with whales in the Frontline.
The analyst proved with on-chain data that BTC’s price negatively reacted to the increase in the number of accumulation addresses. This metric kept rising from February the 8th until May while the Total Balance in Accumulation Addresses “stalled out”, as the analyst said.
Thus, data suggest there was a “change in hands” for these coins. Ben Lilly also showed evidence that indicates some BTC whales grew and others diminished during the sell-off. The chart below indicates that addresses with 1,000 to 10,000 BTC reached 550,000 on February 1st. On May 24th, these addresses stood at around 100,000. The analyst said:
I’m simply conveying here is just bigger wallets that were once showing up as accumulating in the chart above were no longer doing so. Aka larger wallets that were once accumulating were selling. The entities picking up the sold BTC were smaller wallets. (…) And over time this isn’t sustainable in terms of price. You need large wallets driving demand to get higher prices.
On top of the above, miners started “spending Bitcoin”, the analyst said, from May 11th to the 16th. The chart below illustrated a rise in spending over a generation for this period. With this data, the analyst stated: “Its important to look at the price on May 11th as that’s when the selloff really began”.
Miner 1st spend data from our friends at @ByteTree
(Best reliable source about miner spends and generation). Past weeks they have been spending more than they generate. pic.twitter.com/Ax9sWY9er2
— JarvisLabs (@Jarvis_Labs_LLC) May 23, 2021
So, what seemed to have happened in a weekend, a week really has been accumulating for months. In addition, there was a “marker mover” which “attacked” Bitcoin’s price as it tested previous critical support. Ben Lilly summarized as follows:
Now, what this all boils down to is whales were selling for a while. Miners were selling before Elon tweeted and added on to the whale selling. And sharks (market movers) attacked the softness in the market that was building from whales and miners selling.