Bitcoin whale clusters show ‘institutional FOMO’ is behind the BTC rally

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Data shows that institutions heavily accumulated Bitcoin in the $12,000–$15,000 range, and according to analysts at Whalemap, this is a positive trend because institutions and whales typically accumulate assets with a longer-term investment strategy in mind.

The fact that larger hands are accumulating BTC instead of retail investors also explains the somewhat suppressed mainstream interest in Bitcoin, as Cointelegraph previously reported. Various metrics, including Google Trends, have shown lackluster mainstream demand for BTC despite its parabolic rally in recent months.

Institutional “FOMO” makes the current BTC rally stronger than previous cycles

Whalemap analysts described the recent spike in demand for Bitcoin from whales as “institutional FOMO.”

FOMO, short for “fear of missing out,” refers to a trend wherein investors increasingly buy into an asset fearing it will continuously surge. Referring to a chart showing whale clusters and inflows into whale wallets, the analysts said:

“These are the levels and this is what institutional fomo looks like.”

Bitcoin whale clusters throughout 2020. Source: Whalemap

Whale clusters emerge when whale addresses — addresses that hold over 10,000 BTC — buy Bitcoin and do not move it for prolonged periods of time.

This shows that whales plan to hold their most recent BTC purchases in their personal wallets. Whalemap analysts said:

“Bubbles indicate prices at which whales have purchased BTC that they are currently holding.”

The aggressive accumulation of Bitcoin from whales likely occurred based on two key trends that have been present in the cryptocurrency market since October.

First, there has been a sharp reduction in short-contract liquidations throughout the recent rally. In previous rallies, when BTC broke out, upward of $100 million worth of contracts were liquidated on major exchanges. This shows that the rally was not a short squeeze but an actual accumulation phase.

Second, the spot market has been leading the derivatives market, not vice versa. When the price of BTC was increasing, the funding rate of BTC was rarely over the average 0.01%.

The low funding rate shows that the futures market has not been majority long, demonstrating that the demand came from elsewhere.

This bull market will be more stable than 2017

Atop the heightened involvement of whales and institutions, overall trading volume has substantially increased in the recent rally.

Data from Santiment, an on-chain market analysis firm, also shows Bitcoin volume at around $31 billion and this is much higher than on Jan. 6, 2018. At the time, BTC price also was hovering at around $16,350.

Santiment analysts found that the ongoing rally has more volume behind it than the 2017 rally. The analysts wrote:

“With Bitcoin hitting $16,350 on CoinbasePro an hour ago, we’re now at the highest price level in 34 months (Jan 6, 2018). The avg. daily trading volume this week is $31.0B vs. $18.5B then.”

As Cointelegraph reported, the roadblock in the near term for Bitcoin remains whether whales will sell at the $17,000 resistance. Some analysts say that there is no clear resistance until the $18,500–$20,000 range, which means an all-time high could be much closer than most expect.