FTX Contagion Creates Fear Among Whales And Old Hands

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While the contagion effects of the FTX collapse cannot yet be fully assessed, Bitcoin whales and OGs appear to be safe.

Most notably, the insolvent fate of Genesis Trading, DCG and Grayscale hovers over the Bitcoin market like a sword of Damocles. This uncertainty is particularly evident in the cohort of Bitcoin whales and long-term holders.

As Glassnode notes in its latest a reportrecent on-chain data suggests that “the confidence and financial position of whales and Bitcoin old hands have been shaken by the event.”

Whales, institutions and trading firms take a larger share of exchange deposits, according to Glassnode. The average deposit across all major exchanges has increased significantly.

This is a trend that has been seen in other late-stage bear markets, such as that of 2018-19. Also, a similar trend was evident at the end of May after the collapse of the LUNA-UST project.

Glassnode concludes from the data that a driving factor could be the financial situation of Whales (owners > 1k BTC). The average payout price of the whale cohort since the inception of Binance, on July 5, 2017, is currently $17,825.

With the spot price currently below $16,000, this is the first time since March 2020 that the whale cohort has had an unrealized loss. “In response, Whales have actually been depositing coins to exchanges, with a surplus of between 5k and 7k BTC per day in net inflows over the past week,” Glassnode said.

Not Only Bitcoin Whales Show Weak Hands

However, not only whales, but also long-term owners are experiencing weak hands these days. Thus, spending of Bitcoin long-term holders increases.

According to Glassnode, the Spent Volume Age Bands (SVAB) metric shows that just over 4% of the total volume spent this week came from coins older than three months, which is the highest level in 2022.

“This relative size coincides with some of the largest in history, often seen during capitulation events and large-scale panic events,” according to the research firm.

At its fifth highest level historically is the BTC volume older than 6 months. As Glassnode notes, more than 130,600 BTC were spent on November 17th alone. The 7 day average is now 50,100 BTC per day.

Since the collapse of FTX, a total of 254,000 BTC older than 6 months have been spent. This represents approximately 1.3% of the circulating supply. On a 30-day basis, this is the highest since the bull market in January 2021, when long-term investors took profits.

According to Glassnode, it remains to be seen if the current on-chain trends are short-term in nature or if there is a profound loss of confidence in the Bitcoin market, triggered by Sam Bankman-Fried’s fraudulent scheme:

[A] a slowdown and recovery in these metrics would indicate that this may be a short-term event, however with each passing day that these trends continue, it becomes increasingly plausible that a broader scale reduction in confidence is at play.

At press time, the BTC price was just hovering the new bear market low of $15,478.

Bitcoin BTC USD_2022-11-22
Bitcoin hovering over its new bear market low, 1 hour chart. Source: TradingView

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