Data from crypto market research team Santiment shows whales sold significant amounts of Ethereum before and after the steep drop on March 8.
Within 48 hours, the price of Ethereum fell from a Bitmex peak of around $252 to as low as $190 — a 25% correction in a short period.
The abrupt drop in the price of Ethereum led to hundreds of millions of dollars in futures liquidations. According to Datamish, BitMEX’s Bitcoin perpetual futures contract alone accounted for $185 million worth of long contract liquidations on March 8.
Exchange inflows show whales moved Ethereum
Analysts at Santiment said that based on a deep dive into the largest addresses holding Ethereum, whales—investors who hold large amounts of cryptocurrencies—moved ETH from their wallets to exchanges around the time ETH started to fall rapidly.
The research team said:
“We've done a deep dive to look at the recent behavior of the largest addresses holding Ethereum and Chainlink and see what whales are doing in the crypto markets currently. In the case of ETH, whales have been moving their bags to exchanges leading up to and immediately after the market drop.”
A relatively large portion of the crypto market’s daily volume derives from futures and margin trading platforms that offer high leverage of up to 125x. As such, short-term price movements of both major and small cryptocurrencies including Bitcoin and Ethereum are all heavily swayed by the movement of whales.
In a highly leveraged environment, a market sell order worth tens of millions of dollars can be enough to crash the price of a large market cap cryptocurrency overnight.
But such an order can pay big dividends for the seller. “We have actually tracked one ETH address to net an approximate $2,580,000 in profit (59.72% ROI),” the team said.
On March 5, Santiment reported that top 100 holders of Ethereum started to accumulate ETH. Often this sort of buying behavior suggests bullish sentiment, as Santiment noted at the time. In this case, given the aggressive sell-off that followed, it may have actually been a case of whales trying to pump up the price to maximize profits before an expected bear market.
Peak uncertainty is demonstrated by volume
The volume of the CME Bitcoin futures market has surpassed $400 million again for the first time since late February, when the market rallied. As data from Skew.com shows, a spike in the volume of CME Bitcoin futures market coincided with the steep Ethereum drop.
When the volume of the market does not follow the price trend of Bitcoin, it means that the movement can be considered a fake-out before the real direction gets established.
For instance, in the first week of March, the Bitcoin price steadily climbed to the $9,000s, but volume was relatively low. After two days of stability, the Bitcoin price suddenly plummeted to $7,600, recording a 17% drop.
The high volume of the CME Bitcoin futures market at a time when the cryptocurrency market is heavily selling off shows the sheer intensity of the downtrend.
During a bearish short-term trend, alternative cryptocurrencies like Ethereum tend to perform poorly against Bitcoin. This knowledge may have prompted large holders Ethereum to sell in anticipation of a sharp pullback.
This article was updated on March 9, 9:02 p.m. EST.