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27 May 2021

Whales bought $3 billion of Bitcoin when its price fell, says Chainalysis

Large investors used bitcoin’s price crash last week to acquire more coins, according to blockchain analytics firm Chainalysis. 

In its latest market intel report, Chainalysis chief economist Philip Gradwell wrote that “investor whales” bought 77,000 bitcoin last week, an amount currently worth just above $3 billion. This is based on Chainalysis's monitoring of on-chain data.

Last week, bitcoin’s price slid considerably from $49,000 to a low of $30,000, at one point wiping out $3.3 billion in liquidations during a single hour.

The market intel report concurs with The Block’s reporting that hedge funds and asset managers were buying the dip, particularly in bitcoin’s $30,000 - $35,000 range.

Large on-chain losses

According to Chainalysis’s report, this price crash saw a considerable amount of bitcoin being moved on-chain at a loss. Gradwell stated that 1.2 million bitcoin was sent at a 5 - 25% loss, with 120,000 bitcoin moved at a 25% loss or worse. 

“However, this was a smaller number of bitcoin sent at loss than in the late 2017 and mid-March 2020 price crashes, suggesting that last week was not the worst capitulation of holders in bitcoin’s history,” he said.

When measured in U.S. dollars, however, the losses stacked up. The report noted that $3.2 billion was sold at a loss last week, coins that had only been acquired 4 - 13 weeks earlier. In fiat terms, it was “the worst week ever for bitcoin investors.”

It was a similar picture for Ethereum. Last week witnessed the most amount of ether ever moved at a loss. The report stated 22.6 million ether was sent at a 5 - 25% loss. On the flip side, Gradwell noted that, “while people took losses on Ethereum, they were not extremely large in percentage terms.”

Returning to average purchase prices

According to the report, the price of bitcoin has now returned much closer to its average purchase price over the last year. Gradwell noted that the average purchase price was $37,800, a number that bitcoin fell below but has recently broken back above.

The economist said that historically, prices for both bitcoin and ether have often returned to this cost price and that it typically provides a floor, except for the crypto winter of 2018.

For ether, the average purchase price over the last year is $1,700, a price it has not returned to during this crash. Currently, at $2,830, the price of ether is $1,130 higher than this level.

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