Bitcoin (BTC) Briefly Recovers Above $88,000, But Faces Downturn
Bitcoin (BTC) briefly recovered above $88,000, but took another downturn to the $86,000 range. The shift followed a renewal of whale positions, shorting the asset after the local peak.
The Bitcoin (BTC) rally was cut short, as whales in leveraged positions shifted their sentiment. Just as BTC recovered to $88,000, whales started shorting at that level, anticipating a downturn. BTC moved down again, trading at $86,745.80.
Whale trades showed the rally had ran its course, and anticipated a downturn. Historically, a shift in leveraged whale sentiment precedes a shift in direction, suggesting another downward move for BTC.
Whale positions built short leverage at the $88,000 range. Source: CoinGlass
In the past few months, short positions were more rarely liquidated, leading to the confidence of whales in setting up a short so close to the current BTC level.
In addition to the first level of short positions at $88,000, liquidity is also building up on Binance at the $89,000 level. Long positions are still the less liquid side.
The current trading period recalls the price moves in 2024, when BTC drifted sideways with regular liquidations. The recent range is also turning choppy, as whales become more strategic in allocating liquidity. In the past 24 hours, liquidations remained more subdued compared to previous days, as traders chose their positions carefully. BTC saw $74.19M in total daily liquidations.
BTC Went Through a Leveraged Pump
The recent BTC recovery of the $85,000 level and the subsequent rally to a higher range was mostly caused by a rapid accumulation of leveraged positions.
While liquidity flowed out of the spot market, leveraged exchanges are well supplied with stablecoins. This has allowed BTC open interest to recover within days after the series of liquidations in early March.
Within days, BTC open interest recovered to over $27B, even higher when counting all exchanges. Previously, open interest remained subdued at around $24B. The rapid return of traders uses the easily available supply of stablecoins to rebuild their positions and trade strategically despite the volatility.
The BTC volatility increased to its higher range for the past 12 months. The volatility index is at 2.87%. After months of relatively stable prices, BTC volatility sharply increased since the end of February, coinciding with the 30% drawdown from peak prices. The current period of choppy trading is also causing retail to capitulate more easily, leaving the market to whales.
The Bitcoin market still trades under ‘fear’ conditions, though the market index shifted up to 46 points. The recent rebuilding of leveraged positions is more careful, still not showing euphoria or a clear market direction.
Whales Move in with Varied BTC Strategies
There is no single strategy for whales when it comes to BTC. Large-scale holders use a mix of actions, including profit-taking after the market peaked. In November, a total of 120 wallets held more than 10,000 BTC, but by March, the wallets were only 96, including all large-scale exchanges and corporate holders.
Wallets with 1,000 BTC have been increasing, including for corporate treasuries. The latest purchase by Strategy also added to the improving accumulation sentiment.
There is also spot buying on behalf of ETFs, especially coming from BlackRock. One recent whale accrued a balance of $1.38B after withdrawing 3,238 BTC from Binance. The same whale sold 12,287 BTC in February at around $94.3K on average, and has returned to re-accumulate the coins at the lower range.
The renewed accumulation left the wallet with an even higher balance of 15,986 BTC. The whale’s move suggests accumulation may precede a price recovery, but whales will continue to take profits.
As of March 25, 87.4% of BTC addresses were in profit, down from a recent peak above 97%. The market is still capable of capitulations, and BTC keeps reacting to negative economic news. This makes traders extra careful when tracking or trading the leveraged pumps, in case of rapid liquidations.