Watching Bitcoin Well is ‘useless’ for information – Traders
Tracking the wallet activity of Bitcoin (BTC) whales – who own a large share of Bitcoin compared to small investors – does not lead to “true alpha”, according to traders, although it is a measure used as a popular way to gauge market sentiment over a period of time.
“Don't watch baby whales, it's not useful information,” Glasnode lead analyst James Check aka “checkmatey” wrote in a June 15 X post.
“I've never once seen a true alpha leave whale watching. It's good for social media, but it's never serious or valuable analytics,” he added.
It is a common belief among crypto traders that Bitcoin wells with large Bitcoin holdings can influence the market with their trading strategy.
While they can be influential, whale movements can be interpreted in different ways, so the data does not provide a perfect signal.
For example, large holdings of suddenly active dormant addresses may suggest selling, especially if they enter a currency bond address.
Anonymous crypto analyst TXMC, host of the YouTube channel Alpha Beta Soup, warned in a June 15 X post about using “whale” metrics and making statements about them.
When a large amount of Bitcoin is sold by whales in a short period of time, it does not always indicate that a sale has taken place.
“The mechanical downgrade here speaks to wallet mgmt and you're only seeing a piece of a bigger pie. These are organizations and institutions with sometimes multiple wallets and hundreds/thousands of customers,” he said.
“The data around these entities is very noisy, and I can confirm that the biggest ‘whales' of wallets you're looking at are ETFs and exchanges,” Cheek explained in a May 7 post.
“Cheap engagement bait in my honest opinion,” he added.
Social media posts covering whale activities generate a lot of interest.
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A recent post by anonymous crypto trader Marty Party discussing the Bitcoin Well movement has received over 205,000 views.
“Bitcoin OG whales sell over 50,000 BTC in past 10 days, totaling nearly $3.30 billion,” Marty Party wrote on June 14.
Analysts use the data to signal when whales have divergent views on the market.
Analysts who refer to the movements of the Bitcoin well often provide graphics to compare the movement over time.
“Whales just bought $1.3 billion worth of Bitcoin while you panicked,” Bitgrow Lab founder Vivek Sen wrote on June 14, along with a graphic from crypto analysis firm CryptoQuant.
However, other analysts still look to whale movements to gauge the market's direction.
On May 15, CryptoQuant said that demand for Bitcoin well is back in “acceleration mode” following a two-month slump.
“After entering a downward trend since March, the growth of Bitcoin demand seems to be stable,” he said.
CryptoQuant cites the data to question whether demand should accelerate further to sustain this price rally.
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