26 January 2024
On-chain data shows that Bitcoin investors have been clearing out their wallets recently as the asset continues to be disappointing in this post-ETF era.
Bitcoin Small Wallets Have Been Displaying Signs Of Capitulation
According to data from the on-chain analytics firm Santiment, the number of small BTC wallets has seen a sharp decline during the last few days. The indicator of relevance here is the “Supply Distribution,” which tells us about the amount of wallets that currently belong to the different holder groups on the Bitcoin network.
The addresses are divided into these groups based on the number of coins they are carrying in their balance right now. A wallet carrying 0.5 BTC, for instance, would belong inside the 0 to 1 BTC cohort.
Now, here is a chart that shows the trend in the Supply Distribution for three different Bitcoin wallet groups over the last few months:
The first wallet group on the chart is the “0 to 1” coins cohort. The owners of such small wallets are usually the retail investors, popularly known as the “shrimps.”
From the graph, it’s visible that these small hands have seen the total number of their wallets go down in the last few days. To be more specific, around 487,300 shrimps have cleared out their wallets in this selloff, a decline of almost 1%.
“History tells us that this is typically a sign of capitulation, which can lead to a market price bounce until smaller traders begin to get optimistic toward crypto as an investment vehicle once again,” explains the analytics firm.
“The disappointment of market performances since the 11 ETF approvals over 2 weeks ago is largely attributed as the cause for these wallet liquidations,” Santiment adds.
The spot ETFs have been one of the main topics in the cryptocurrency community during the last few months, and the price rally in Bitcoin was in part driven by anticipation around them. Unlike what some investors had imagined, though, the market sold at the news, and BTC has been unable to recover so far.
The shrimps aren’t the only ones that have capitulated recently, though, as the 1-1,000 coins group has seen a decline of 4,752 wallets since January 5th, while the 1,000+ BTC entities have shed 27 addresses since December 27.
The former group includes the mid-sized Bitcoin holder groups like the “sharks,” while the latter cohort includes the largest of the hands on the network: the “whales.”
Clearly, however, these larger entities had started selling ahead of the spot ETF approvals, while the shrimps had still been optimistic about the event. And interestingly, since the smallholders have started their latest capitulation, the whales have, in fact, seen some growth in their addresses.
BTC Price
Bitcoin has seen some sharp recovery push in the past day as the asset’s price has now bounced back to the $40,800 mark.