Investors can track BTC whale transactions to derivatives exchanges to mark market bottoms
Bitcoin (BTC) whales are following a set pattern of trading to avoid losses during capitulation events that can be used as a powerful indicator of the market bottom according to an analyst at CryptoQuant.
Writing in a ‘Quicktake’ on the crypto market analytics platform, the verified pseudonymous analyst ‘eth_whalehunter’ said that whales and funds tend to send their BTC to derivatives exchanges to set or cover long positions during capitalization events.
Powerful Bear Market Bottom Indicator – $BTC Exchange Inflow Mean
“Whales and funds tend to send their BTC to derivative exchanges to set or cover long positions.”
— CryptoQuant.com (@cryptoquant_com) October 14, 2022
Tracking these whales can give investors an insight into the market bottom. Particularly, the analyst states that tracking the Bitcoin Exchange Inflow/Outflow Mean indicator “is a reliable long-term bottom indicator.”
The levels of this indicator to watch out for are BTC Inflow means greater than 2.5 BTC and Outflow means greater than 10 BTC. These levels mark BTC local bottoms. However, he admonished traders to also use other on-chain indicators such as Net Unrealized Profit/Loss (NUPL), Puell Multiple, Market Value to Realized Value (MVRV), and BTC Hashrate, adding that investors can alternatively dollar cost average (DCA) into the market.
Whale activity intensifying in the BTC market
The whale loss mitigation pattern is being identified amid increasing whale activity in the market. Whale investors have been noted to be contributing to the massive drop in the exchange reserves of BTC which has fallen to 8.7% of the total circulating supply.
Similarly, a U.Today report identified a single whale that has allocated over $500 million to buying BTC since September, adding around 5,000 BTC during the period.