Bitcoin’s price volatility spiked massively in January 2020, and could keep increasing as whales surface in the market. The coin’s annual volatility grew 8% in January, to a three month high of 58.2% – according to an industry report. Volatility further rose as the digital assets price ralled from $6,850 on 3 January, closing out with a 30% gain at the end of the month – the best since 2013. Now, on-chain activities suggest Bitcoin volatility will continue.
How Crypto whales play a role in volatility.
“Cryptocurrency whale” is the term used to describe big players in the crypto community who hold large amounts of a certain digital asset. The ocean as a metaphor for this particular situation is apt, as whales are considered to be big players in the markets and they can have direct influence over where the markets go. Their movements can often lead to rallies or dips.
With these most recent price rallies, whales seem to have jumped onboard. The number of whale addresses (ones with anywhere from 1K BTC to 10K BTC) ticked higher in the second half of the month of January – according to the research.
The number of whale addresses spike from 2K to 2,030 which marked the transition into the accumulation stage of the market. Historically, this transition has resulted in high volatility for the Bitcoin market. For example, whales were accumulating in September 2018, which resulted in a wait-and-watch situation in early 2019. The annualized volatility then dipped below 20% in the middle of November, and rose to a whopping 100% by late December 2019.
Similarly, the spike in price volatility in Q2 of 2019 was heralded by mass accumulation by larger whales.
This strange pattern of behavior could be as a result of whales having enough resources to impact the market with large orders.
🚨 🚨 🚨 🚨 🚨 🚨 🚨 🚨 🚨 🚨 47,446 #BTC (418,316,853 USD) transferred from unknown wallet to unknown wallet
— Whale Alert (@whale_alert) February 28, 2020
Growing adoption is surging on-chain activity on all fronts.
Sudden price swings have previously been noticed during accumulation periods. The cryptocurrencies rise from $4,100 to $5,100 on 2 April 2019 was reportedly because of an order worth $100 million spread across various exchanges.
On chain activities suggest Bitcoin volatility will continue, and whales are playing a major role. Whale action has influenced price sell-offs in the past – a BTC flash crash on 9 July 2019 was reportedly because of a sell order of a whopping 6,500 BTC on Binance.
Hodlers (those holding 10 to 100 BTC) are also accumulating. “Family offices, high-net-worth individuals and proprietary trading accounts have been building BTC positions continuously in the 10 to 100 range. It’s a sign of growing adoption of Bitcoin as an investment,” Gabor Gurbacs, digital asset strategist/director at VanEck/MVIS, said.
At this point, it seems like everyone’s getting in on the accumulation game. Get the best rates on Bitcoin and other digital assets by using the Tap app. Tap scans all major exchanges to find you the best price on the trading pair of your choice, and then allows you to store it in the built-in, cold storage cryptoasset wallet.
On-chain activities suggest Bitcoin volatility will continue, and whales are a major factor. Both whales and hodlers are actively involved in the accumulation process right now, and that’s a clear indicator of where the market may be going. As we near the next halving, it’s fairly likely that we’ll see accumulation ramping up even further. Exciting times are ahead of us.