In early November, Bitcoin (BTC) went so far as to slip below its psychological support of $100,000, reaching around $98,900 before regaining its six-figure valuation. While this may suggest the prevalence of bearish sentiment among its investors, a recent on-chain valuation has surfaced explaining why the price of Bitcoin could soon see a major reversal.
Binance Sees Increase in STH Activity; Triggers a cascade of liquidations
In a recent QuickTake article on CryptoQuant, on-chain analyst Amr Taha reveals a sudden change in Bitcoin retail activity on the Binance network. Taha’s report focuses on the “(Bitcoin) LTH/STH Buy/Sell Binance” metric, which tracks buying and selling activity on Binance, distinguishing between long-term holders (LTH) and short-term holders (STH).
Taha points out that on November 3 and 5, Binance saw a significant increase in Bitcoin STH sales activity, including from holders known as “clown wallets.” Around 251 BTC flowed to Binance on November 3, while an even larger amount of BTC, around 517, was sent to Binance on the 5th of that month.
Due to the usual panic tendency of these STHs, their positions often serve as liquidity for long-term holders of the cryptocurrency who seize the opportunity for accumulation amid a fear-driven retail market.
On the other hand, the analyst highlights the results of BTC: Binance Liquidation Delta, a metric that measures the difference between long and short liquidations on Binance, revealing whether more long or short positions are being forcefully closed.
According to Taha, most of the recent liquidations appear to be long positions entered too late in the Bitcoin cycle and with high leverage. These positions were forcefully closed in the $107,000 to $100,500 range, triggering what is commonly referred to as a long squeeze. As a reminder, a long squeeze is a series of sales that occur after traders with overleveraged long positions are threatened or have been eliminated.
Although a long squeeze usually causes the price to drop quickly, it poses no major problems for long-term investors in a cryptocurrency. As a result, long-term Bitcoin holders have historically viewed these events as accumulation opportunities, providing a soft cushion against the cryptocurrency’s sharp price decline. If historical trends were to repeat, BTC could soon reach its lowest price, after which accumulation and possible price expansion could ensue.
BTC Price Overview
At the time of writing, Bitcoin is valued at around $103,500. The cryptocurrency saw 24-hour growth of more than 2%, according to data from CoinMarketCap.
Featured image from Unsplash, chart from Tradingview.com
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