A technical indicator that preceded the sudden Bitcoin crash in February 2020 again shows warning signs.

Bitcoin proponents and investors are (understandably) anticipating a “supercycle,” with certain circles predicting that the world’s largest cryptocurrency by market capitalization will reach as high as $ 1 million.

However, this party could be spoiled – if you take into account a technical indicator. So warns Ki-Young Ju, the founder of the crypto analysis tool CryptoQuant, in a tweet today:

“$BTC Exchange Wal Ratio (72h MA) has reached 90%”

He adds:

“It is the highest level since February 2020 before mass dumping. Don’t take too much leverage on your longs. Be careful.”

Which tool is used for whale dumping?

According to CryptoQuant, so-called” whale dumping “is a measure of the deposits of some of the largest bitcoin holders-colloquially known as” whales ” in financial circles.

These owners usually keep their businesses secret, and their identity is often unknown. But: tracking the Wal wallets helps to get information about what big holders of Bitcoin and other cryptocurrencies are doing and how their trades could affect the market.

CryptoQuant uses two indicators to check how whales dump their coins: 1. an “All Exchanges Inflow Mean (24h MA)”tool that calculates the average amount of Bitcoin deposits on all crypto exchanges, and 2. an “Exchange Whale Ratio Tool” that calculates the top 10 inflow transactions relative to total inflows.

The latter indicator is designed to show a ratio of over 85% when prices shoot up in a “fakeout” or precede a dump. In the CryptoQuant blog it says:

“In the bull market, it often stays below 85%. On the other hand, in a bear market or a fake bull market for a mass crash, it usually stays above 85 %.“

Where is Bitcoin now on this chart?

As the image below shows, Bitcoin’s “exchange whale ratio” is currently (at the time of this article) at 0.90 – which, according to CryptoQuant, suggests conditions ripe for “mass dumping.”

Image: CRYPTOQUANT.

The last time the metric reached such levels, Bitcoin experienced sudden price drops several times. In March 2020, when BTC fell to below $ 4,000 for several hours, the tool peaked at $ 0.90. Also in November 2018, when Bitcoin fell from above $ 6,000 to below $ 3,900, the tool remained above $ 0.85.

Bitcoin is currently trading well over $ 46,000 at $ 46,245 and has risen nearly 20% in the last 7 days alone. But given the resistance so far at $ 46,000-could the whale dumping tool prove to be right? Only time will tell.

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Text credit: Cryptoslate

Last updated on August 11, 2021

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