Bitcoin Inflows are at a Three Month High, Causing Panic Among Investors

The number of Bitcoin whales is rapidly dwindling, presumably due to three-month high inflows of coins to centralized exchanges (CEXs).

Glassnode, a market tracker for Bitcoin (BTC), has released multiple gloomy signs, including data indicating a market exit of whales holding at least 1,000 coins and exchange inflows of far more than 1.7 million coins, the biggest since February.

High BTC inflows on CEX indicate that whales may be fleeing the market by selling coins, maybe in preparation for a protracted market slump. 

Short-term holders presumably executed recent sell-offs who had accumulated coins in late January and early February, when values had reached a 6-month low of around $34,800.

The Bitcoin Fear and Greed Index has dropped to 11, the “Extreme Fear” area, due to unfavorable market outlooks based on hard evidence. The index measures how fearful or greedy Bitcoin investors are in general.

Another analyst, Benjamin Cowen, tweeted that since Bitcoin has put in a lower low, perhaps some of the remaining bulls will now concede that it is a bear market for BTC.

Is there any optimistic news?

Despite the unfavorable perception, everyday BTC transactions do not appear to have been harmed. On May 9, according to YCharts’ on-chain data, Bitcoin Transactions Per Day is at a level of 233,892.0, up from 231623.0 yesterday and down from 274,691.0 one year ago. The current daily transactions are near the average levels of January 2022.

Source: ycharts.com

“Many of you are waiting for the Bitcoin’s capitulation wick,” Glassnode’s lead on-chain analyst “Checkmate” tweeted on Sunday, partially reinforcing the concept that investors anticipate BTC to continue to plummet.

A capitulation wick is associated with a relatively long, abrupt, and catastrophic decrease in price, such as the one seen on March 12, 2020, when BTC fell 43 percent in a single day to roughly $4,600.

On Sunday, market analyst Caleb Franzen tweeted that investors can expect markets to continue to trend downward, based on his analysis, which indicates it will remain “short-term bearish.”

As per his analysis, when the 52-week W%R becomes oversold, it indicates short-term bearishness. Also, this typically occurs in the middle of the drawdown from ATHs during the “reset” phases. That’s likely where we are now. 

He went on to present more data from the past, the max drawdowns for #Bitcoin after the W%R first became oversold:

September 2011: -61% 

September 2014: -49% 

September 2018: -52% 

March 2020: ±0% (bottom).

It is worthwhile to mentally prepare for another -50% drawdown based on this signal, is what he said.  

He said that he is happy to accumulate bitcoins at this level.

We recently reported that Bitcoin HODLers’ behavior is still positive despite the uncertain macro and geopolitical backdrop. The week hands and top buyers have mostly moved out of the network, and HODLers dominate the market. 

What is causing this drawdown in BTC price?

Recently, there has been much news related to curbs and restrictions on transactions of digital assets. IMF asked Argentine Government to restrict its banks from trading in cryptos. 

The Indian Government has imposed a 30% tax on earnings from crypto transactions. The Russia-Ukraine conflict is another factor that has affected the crypto market severely. 

BTC is currently down 16 percent over the last seven days, trading at around $33,680.