Data Analysis: Who exactly drove this record drop in Bitcoin?

This article is sourced from bitcoinist and compiled by Blockchain Knight.

After a rapid recovery, Bitcoin seems to be losing its upward momentum, encountering resistance near the $40,000 mark, but neither of the two major news events could push it through.

At the time of writing this report, the BTC trading price was $37,663, fluctuating sideways over a short period. Over a longer timeframe, this highest market capitalization cryptocurrency has seen corrections of 13.6% and 24.6% on the 7-day and monthly charts, respectively.

This is one of the most brutal sell-offs for BTC, which saw its price drop from around $60,000 to its current level. Most believe this was triggered by a tweet from Tesla CEO Elon Musk pointing out the high carbon emissions of Bitcoin.

While the event was a catalyst, on-chain data suggests otherwise. A report from Arcane Research shows that Bitcoin's daily spot trading volume reached an all-time high on May 19.

The study estimated that Bitcoin's trading volume during this period was around $35 billion, indicating that spot traders played a significant role in the sell-off.

Arcane Research added, "The record trading volume was due to massive sell-offs during the market crash, but whales were buying, with Coinbase processing nearly 2 million transactions on May 19 alone."

As analyst William Clemente pointed out, most of the sell-offs were conducted by spot buyers who had accumulated Bitcoin during this bull market cycle. The average prices of Bitcoin during the period from December 2020 to April 2021 were $35,000, $45,000, and $60,000, respectively.

Who are the masterminds behind the Bitcoin sell-off?

Analyst Ben Lilly conducted a more detailed analysis of the sell-off, noting that whales, miners, and other market movers were the driving forces behind this event. The "trio" of these roles, especially the behavior of whales, contributed to what happened a few days ago.

The analyst used on-chain data to demonstrate that the increase in the number of accumulation addresses had a negative impact on Bitcoin's price, a metric that has been rising since February 8. As the analyst mentioned, it wasn't until May that the total accumulated balance showed signs of "stagnation."

Therefore, the data indicates that these Bitcoins are experiencing "turnover." Ben Lilly also presented some evidence suggesting that some whales increased their holdings during the sell-off, while others decreased. The chart below shows that on February 1, the number of addresses holding 1,000 to 10,000 BTC reached 550,000, and by May 24, this number was about 100,000.

The analyst pointed out, "The wallets that were accumulating significantly are no longer doing so; wallets that once held large amounts are now selling, while some slightly smaller wallets are accumulating. Over time, this is unsustainable in terms of price. Large wallets need to drive demand to achieve higher prices."

Ben Lilly noted that, in addition, miners began to "consume Bitcoin" starting May 11. From May 11 to May 16, there was an increase in miner sales. According to this data, the analyst stated, "It's important to look at the price on May 11 because that's when the sell-off really began."

JarvisLabs pointed out on May 23 that ByteTree's data on miners (the best reliable source for miner spending and generation) indicated that their spending has exceeded their output over the past few weeks.

Thus, what happened over the weekend had actually been building up for months, and another factor was that "market movers" "crushed" Bitcoin's price when critical support was needed.

Ben Lilly summarized as follows: "Now, it all comes down to the fact that whales have been selling for a while, and miners started selling before Musk tweeted and whales sold, while some sharks (market movers) shorted the market, leading to market weakness alongside the sell-off by whales and miners."