Increasingly, traders are examining the data on the chain to “forecast” short and long-term Bitcoin (BTC) price developments using platforms such as CryptoQuant, Glassnode and WhaleAlert.
In particular, traders actively use data points such as bitcoin exchanges, outflows, and steady inflows to predict where BTC might go.
However, this type of data must be viewed with great caution, as the owners of large companies also realize that this data is increasingly being used by many people in their trading strategies. Thus, people or whales with high net worth can manipulate this data to tilt the market in their favor – but how?
Bitcoin data can be used on the chain for psychopaths.
When large amounts of Bitcoin are deposited on a stock exchange, this usually indicates that a whale or large investor is planning to sell BTC, at least in theory.
Investors who hold a lot of bitcoins are usually left in unrestricted or self-service portfolios for privacy and security reasons.
When these assets hit the stock markets, it appears that the whales are putting a lot of pressure on the market.
But since whales know that investors can track deposits through tracking platforms within the chain, this opens the door to the wrong stance.
In technical analysis, false exit is a term used to refer to a situation where a trader enters into a position waiting for a signal for a future price move or transaction, but the signal or movement never develops and the asset moves in the opposite direction.
Whales, for example, can place large amounts of BTC on various exchanges, giving the impression that they are selling a lot of BTC, which raises concerns in the market to lower BTC.
In fact, whales cannot sell deposited BTC at all. Alternatively, for example, they can use this fake mode to purchase an asset at a lower price.
A merchant known by the pseudonym Cantering Clark explained:
“It is correct to say that the data on the chain and mixing of bitcoins from portfolios to exchanges and vice versa is a scam being misused. Do you think the big player would be so open about it that they are planning to sell it.” I think they are still catching up in the quarter-finals? ”
Ki Yong Joo, CEO of CryptoQuant, has raised a similar problem in what he calls “psychological operations” – the psychological operations of data on the web.
Joe noted that whales could list Bitcoin on stock exchanges to shift market sentiment from greed to fear.
Negative market sentiment alone can be sufficient to drive down the price, which could also lead to back-to-back liquidations if the futures market is crowded. Joe Sa:
“Speculation is speculation, but whales can put large amounts of Bitcoin into the stock market to scare people because so many are watching whale warnings.”
For example, Gemini was reported to have received large Bitcoin deposits before Bitcoin dropped to $ 54,500 on March 15.
At the time, Joe emphasized that although sales orders are in place, it can also be a psychological incentive to make the market believe selling pressure is imminent. It is to explain:
“Maybe it’s one of three: 1. Psyops 2. Gemini operates a private brokerage service that handles sales orders on other exchanges. 3. Some brokerage services use Gemini Custody software and execute sell orders on other exchanges. ”
According to Philip Swift, Analyst and Co-founder of Decentrader:
“It can be dangerous for traders to overestimate the importance of transactions between wallets on the Bitcoin blockchain. As we saw today, there is often confusion about who actually owns certain wallets.”
Swift went on to explain that “there is clearly a possibility of” peeing “as big players fool hungry wallet watchers into believing that money is being moved before it is sold in the market.
Regarding wallet transfers, Swift said:
“This is not the point, but simply to make people believe that Bitcoin is about to sell. It is important to remember that big players have many other ways to buy or sell bitcoin in US dollars, such as over-the-counter trading, futures trading, etc., it is not It is always necessary to move their money along the chain before buying or selling. ‘
Fairly accurate but there is no magic bullet
However, Bitcoin deposits on exchanges have historically been a fairly accurate indicator of the direction of BTC.
For example, in the past three weeks alone, the two major peaks of bitcoin exchange flow have hit local peaks on February 22 and March 15.