In early November, Bitcoin (BTC) slipped below the $100,000 psychological support line to reach around $98,900 before regaining six-figure value. While this may suggest that bearish sentiment prevails among investors, recent on-chain valuations have surfaced, which explains why the Bitcoin price could soon experience a major reversal.
Binance has seen an increase in STH activity. Liquidation cascade trigger
In a recent post on CryptoQuant’s QuickTake, on-chain analyst Amr Taha revealed a sudden change in Bitcoin retail activity on the Binance Network. Taha’s report describes the ‘(Bitcoin) LTH/STH Binance Buy/Sell’ metric, which tracks buying and selling activity on Binance and distinguishes between long-term holders (LTH) and short-term holders (STH).
Taha notes that as of November 3 and 5, Binance has recorded a significant increase in Bitcoin STH selling activity, particularly from holders known as “clown wallets.” On November 3, approximately 251 BTC flowed into Binance, and on the 5th of this month, an even larger amount of approximately 517 BTC flowed into Binance.
Due to this general panic tendency of STH, their positions often serve as liquidity for long-term holders of the cryptocurrency who seize the opportunity to accumulate in panic-stricken retail markets.
Meanwhile, the analyst highlights the results of BTC: Binance Liquidation Delta, a metric that measures the difference between long and short liquidations on Binance, shedding light on whether more long and short positions are being forced to close.
According to Taha, most of the recent liquidations appear to be long positions that entered too late in the Bitcoin cycle and are highly leveraged. These positions were forced to close within the $107,000-$100,500 range, creating what is commonly known as a ‘long squeeze’. For context, a buying squeeze is a series of sales that follow after traders holding heavily leveraged long positions are threatened or wiped out.
Long-term squeezes usually result in sharp price declines, but this is not a big deal for long-term investors in cryptocurrencies. As a result, long-term Bitcoin holders have historically viewed these events as accumulation opportunities, thereby providing a soft cushion in case the cryptocurrency’s price plummets. If historical trends repeat, BTC could soon reach a price bottom, followed by accumulation and price expansion.
BTC price overview
As of this writing, Bitcoin is worth approximately $103,500. According to data from CoinMarketCap, the cryptocurrency grew more than 2% in 24 hours.
Featured image from Unsplash, chart from Tradingview.com
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