CRYPTO TRADING
Crypto Market Intel: How did the Top 3 crypto holders respond to recent price gains?
Investors and Traders in Bitcoin, Ethereum & Ripple are behaving differently when it comes to profit-taking
Finally, after almost three years, Bitcoin (BTC) hit an all-time high this week of $19,912. Ever since then, the premier digital coin and the associated cryptos have been exhibiting heightened volatility, which is typical of this market. Although the consolidation in BTC and Alt. coins continues, Bitcoin is trading over $19k at the time of writing.
The bullish sentiment stays intact, and we might still see some extended consolidation before BTC takes another stab at the all-important $20k figure. Similar consolidation is being seen in Ethereum and the other digital coins as well. They will be taking the cue from Bitcoin for the next move — up or down.
Resilience in investor demand and safe-haven buying in Bitcoin ever since the pandemic started has kept the prices well supported. Retail investors being able to buy bitcoin via more mainstream options, such as Square or the Grayscale Bitcoin Trust are also keep the demand for BTC strong.
However, just like any mature financial market, profit-taking is part of the game. And the Chainalysis Market Intel looks at how this played out in the last week for the top three digital coins — Bitcoin, Ethereum & Ripple. Exchange inflows are correlated with intra-day price volatility and this is an important metric to watch to analyze this. According to the research, this is how things played out last week.
Bitcoin (BTC)
For Bitcoin, there has been a large increase in bitcoin sent at a 25% or more USD gain in recent weeks as the price has climbed. However, this previous week, the amount has dropped despite continued price gains (Figure 1). This move is in contrast to what happened in February and August of this year when high levels of cashing out were accompanied by price falls. Although there is profit-taking going on at current price levels, it is not enough to put downward pressure on the price.
Ethereum (ETH)
Ethereum is experiencing a higher amount being sent to exchanges at 25% or more USD gain, but this is still not extraordinary by any means. As the chart above (Figure 2) highlights, past spikes of similar size have been associated with plateaus or falls in the Ethereum price. Similar to what is happening in Bitcoin, this time the price has continued to gain traction even as investors have cashed out.
Ripple (XRP)
XRP holders have registered massive gains — 168% in the last month alone. In contrast to BTC & ETH, however, XRP investors have exited last week in large numbers, sending 5.1 billion XRP at a 25% or more USD gain (Figure 3). According to the report, there is a lot of fundamental pressure on the price but this has not been felt yet. The price of XRP did drop significantly earlier but later recovered. It would be interesting to see how this equation plays out.
Collectively speaking, XRP seems to be at a much higher risk of large-scale profit-taking as compared to Bitcoin & Ethereum. In the last seven-day period, the average bitcoin exchange inflows have only been 9% higher than the 180-day average, and 13% higher for Ethereum. Exchanges inflows should be watched carefully as the increased amount would lead to greater price volatility.
Track daily bitcoin exchange inflows here and Ethereum inflows here.
