Retail Traders Catalyzed Latest BTC ‘Panic Sale:’ Chainalysis
2 min read
Retail traders—and not institutional investors—were the main driving force behind yesterday’s BTC sell-off, according to blockchain intelligence firm Chainalysis.
Cryptocurrency markets crashed on “Black Wednesday,” with BTC dropping more than 30% before bottoming out near $30,000. Other major cryptocurrencies also saw massive drops of up to 50%.
In his latest “Market Intel Report”, Chainalysis chief economist Philip Gradwell pointed out that there were only four other days since 2017 when the end-of-day BTC price fell by more than 25%.
Gradwell listed four key moments: The crash in December 2017 from BTC’s peak of $20,000, the fall below $10,000 in February 2018, a continued drop to $4,000 in November 2018, and, finally, last year’s sell-off.
Cryptocurrency prices have plunged 30% or more this week across several assets. Our chief economist @philip_gradwell analyzed on-chain flows to investigate why, compare this crash to previous ones, and try to determine what could happen next. https://t.co/086VIJhyce
— Chainalysis (@chainalysis) May 19, 2021
With so many new entrants only recently joining the market, the vast majority were unprepared for yesterday’s volatility. What’s more, the data suggests that “much of the selling is from people with assets already on exchanges, who tend to be retail investors,” writes Gladwell.
Traders rush to exchanges
The analysis also assumes that tokens sent to exchanges (inflows) are more likely to be sold. Conversely, tokens leaving the exchange (outflows) suggest that users are securing their holdings in a cold storage wallet for the long term.
Analysts monitor these flows to draw bearish or bullish conclusions, respectively.
According to crypto analytics platform Glassnode, there was a massive surge in BTC transferred to exchanges on May 19.
In fact, it was the largest single-day inflow since the March 2020 crash, when global markets collapsed due to the coronavirus outbreak.
The chart shows that roughly 299,000 BTC was moved to exchanges in 2020 as the coin’s price cratered. By comparison, holders transferred roughly half of that amount (162,700 BTC) to exchanges yesterday.
Though yesterday’s inflows were lower in BTC terms, the dollar amount was nearly six times higher than in March 2020.
Roughly $1.65 billion worth of BTC was moved to exchanges on March 13, 2020. Yesterday’s inflow was worth more than $6 billion thanks to BTC’s price growth over the past year.
BTC is currently trading hands at around $42,000, according to Nomics.
