Study of the correlation between the price chart, the volumes of transferred cryptocurrency funds and private transactions using the example of Bitcoin (BTC)
Dear friends,
In the first part of our study of the correlation between the BTC rate and the movement of the crypto currency between wallets, we examined the total volumes of transactions within the blockchain and their correlation with the change in the Bitcoin exchange rate. We discovered a fairly consistent correlation between the beginning of the anomaly and future growth. However, the peak values of the indicator did not always coincide with the peak in prices and sometimes lagged behind the reversal. The same happened with the intersection of the trend line and the indicator. Obviously, an additional filter is needed to identify false signals, which can be either technical analysis indicators or a detailed study of movements between individual wallets. The second part will study the latter - the signal channel of the movement of crypto currency between wallets.
Obviously, we are not talking about simple wallets, but rather those holding significant funds. If you were wondering about how the big fish influence market volatility, this study will also help you uncover this mystery.
Is there really a correlation between changes in the rate of crypto currencies and large transfers between wallets? To study this issue, we will use the popular Whale Alert service (its signals are popular on twitter) and the well-known website bitinfocharts.com. To confirm our theory about the dependence of BTC value on large transfers, we will consider all abnormal transactions and see how they affected the Bitcoin rate in the recent 2019 formation.
The first abnormal transaction that stands out from the rest occured on April 9, 2019 for almost 11 thousand BTC (see the screenshot above).
The screenshot shows that 10,688.99 BTC were sent from wallet 3NQFz3YCkaMWcmH6cTQzbMvNt36vp8x8wX. It is also interesting that the transaction was made to this address from a cold Binance wallet 3M219KR5vEneNb47ewrPfWyb5jQ2DjxRP6 and 100 BTC were transferred to a hot wallet 1NDyJtNTjmwk5xPNhjgAMu4HDHigtobu at the same exchange. It seems that a major player uses the following tactics to disguise themselves: to withdraw a large amount of bitcoins from a cold Binance wallet, they constantly transfer it from one unknown wallet to another. By gradually “pinching away” small amounts of 50 - 500 BTC from a large piece, the whale transfers them to hot Binance wallets. To confirm this theory, we will trace other movements of these bitcoins:
df169b6aaa2175c7cf87a334c94172a4206cb30257b190799ae672c0cefcd857,
021efbba1c151338e6444c0c7c4bf51ec026349d76ee8bb814dcb6eb1b3c8e7e,
2e10e5d10c7a2f359b9080f6de9895171098ad02ede3eaace66023c0ef6a2b0d,
d3004398ed56ca5eb4fba37177e6254bf33c7ef82f75e019141d29053f96e395.
As we see, the theory is confirmed.
If we look at the bitcoin chart above, starting from the transfer date April 9, 2019 (green arrow) we see that from April 10 to 12, BTC dipped by ~ 10% (see the red arrow). It is hard to say whether it is a coincidence or not. For further analysis we need to increase the sample size.
However, when continuing to study transactions and their ways, I came across a phenomenon know as “mixer”, which makes it impossible to determine who the sender of the crypto currency is.
As an example of this phenomenon, consider one of the major transfers of 4,065.353 BTC on April 13, 2019 - transaction
ebb0870da8cd5789654ec085867f64d55363505a37a836b9bf1f8f84402470ca
As we can see, this amount was transferred to a Poloniex wallet from many different addresses. Then the same amount goes to an unknown wallet:
c77b61714d29f57f91422d1a280f46df88b36b0a0d686f3cec7ebd15d0ad8c43
Then the dissolution step begins:
6319c222583d2625139f0fd4ed2c07658599c0b7fb8b9ed30fec4feb9598a0a7
4b2d02691a87d00b6e807aa09a4115433dc8d5241856e578c2fe5b52aad7b875
In the last transaction, bitcoins are split into two addresses. First, let us see what will happen to 218.58 BTC:
7c195b805c8db59a5d7c27ffcb6adaed33ec376dc1dc298e2b66a78bea863835
As you can see from this transaction, bitcoins were divided into 15 BTC pieces and sent to many wallets. Further tracking of these 218.58 BTC is not possible - they have been dissolved. Now let us see what happened to the remaining 3,831.09 BTC. They also continued to be divided into smaller amounts:
e7734b354aae1aa40ad185982ffbbbbe3891103a06b00d97f48e9c41e9c78512
In this transaction, we can notice that the Bitstamp exchange wallet is used, but this is probably to cover the tracks:
719bd4f514d004a500f31ec52532654027ababdd452c574b240542195eed24f8
This transaction tells us that these bitcoins were withdrawn from Bitstamp:
1cbe31c8dafc3570939d5742efae8343bba53d5ec1c7bde22091bc1b9617b22d,
42e2094b5ed7e3142ea93537fcc14c79b17bd5d5dfd59713afa76707776f1fb1,
ee61dcdff858c9e511ca8a8c13b2d5045e1606c688348611f0bc40087b1952a9
And so on until complete dissolution.
The principle of the mixer technique is that large transfers are made to an unknown wallet, from where they are scattered in small pieces to different crypto exchanges, and from there they are transferred to accounts that belong to the addressee.
In the chart above, we can see that after the Bitcoin transfer to Poloniex on April 14 (red arrow), on April 15 there was a minimal drawdown of just over 4% (green arrow). For the highly volatile crypto currency market, this decline is not significant. From this we can conclude that these transactions did not affect the market in any significant way.
On April 23, the Whale Alert service spotted a major transaction of 7,073 BTC (see screenshot above). If we look at the transaction at bitinfocharts.com, we see that the transaction was from a cold Bitfinex wallet 3Be6wM41PEYesUJfs8hBRTkhAZYmnXBqw8 to two wallets: 3QtLQpJz4n7ToAVb6dR9xidbYxKf4J5x1j, 1Kr6QSydW9bFQG1mXiPNNu6WpJGmUa9i1g, which turned out to be a cold and a hot wallet of the same exchange.
In the chart above, we can see that after the transaction on April 23 (red arrow), from April 24 to 25, bitcoin dropped (green arrow) by ~10%.
On May 15, 2019 wallet 18mkjbVaHAcMauL6iiy7zm9VjMYCjy4UU1 sends out 45,000 BTC, as we can see in the screenshot above. 12,000 bitcoins come directly to wallet 33LcXfaeL8jPUUntAXXJbNGxDnxGtRfnbc on Bitfinex.
In the chart above, you can see a decrease in bitcoin by just over 20% on May 16 (green arrow). Considering the fact that 12,000 BTC (red arrow), which we mentioned above, were transferred to Bitfinex exchange on May 15, 2019, it can be argued that the correlation pattern of the rate of bitcoin and large transfers was confirmed in this formation.
The remaining BTCs are split into smaller amounts between wallets. After a certain number of transfers in June, some of them come to the same Bitfinex wallet. This is confirmed by the following transactions:
4c5fc978640ecb84cbf41a0a6b314e40541b31cd28197db7a5934abe7c8538c8,
ec313c158cb75c586967e0ceb2c332059a6f4ec66cac8818083da407f0c76f73
They show transfers of 2,000 and 9,000 bitcoins on June 18 and 30, respectively.
On May 31, 66,666 BTC are sent (see the screenshot above) from the already familiar cold Binance wallet 3M219KR5vEneNb47ewrPfWyb5jQ2DjxRP6.
If we combine the movement of the price of Bitcoin on the same dates (see the chart above) with the beginning of the movement on May 31, 2019 (red arrow), we can see that on June 3, bitcoin started a decline (purple arrow), which then amounted to about 15%.
If you look at the general chart of BTCs sent in the blockchain, then we also see a strong momentum soaer (green arrow above).
In the price chart above, we can see that after the correction, bitcoin continued to grow.
On June 6, the Whale Alert announces a large movement of bitcoins (see the screenshot above). These bitcoins are part of the group that began their movement on June 3, 2019 from the cold Binance wallet 3M219KR5vEneNb47ewrPfWyb5jQ2DjxRP6.
Let us consider two transactions in the chart above by combining them. This is the transaction on Binance on June 6 (red arrow):
e01494c0e794b510f481cefa78849463f87479070b46c8530c4783bbefa11a00
And the transfer on Bitfinex on June 18 (purple arrow), which we mentioned above:
4c5fc978640ecb84cbf41a0a6b314e40541b31cd28197db7a5934abe7c8538c8
As you can see from the chart, these transfers were made at the beginning and middle of a powerful bullish trend (indicated by a green arrow in the chart). It can be stated that if we believed the indicator and exited the position on June 6 or 18, we could have missed a strong upward price movement.
On June 28, we see two transactions from an unknown wallet to the Poloniex exchange, which totaled 30,000 BTC. Consider this transaction for 6,000 BTC:
dd3cc23589b5d93c8a586608264c4348cde19f32b5f04d63215cc2c594ba014f
As you can see, the amount was formed by two transactions from one wallet for 2,500 BTC and 3,500 BTC. If we look at the 2,500 BTC, they were collected from several Bitstamp wallets:
70a056c2093d5f6a0147a682db852b2cd4406428057313600a5d5203ea76a0cb
3,500 BTC came from a hot Bitfinex wallet:
2bdf987e38ab1442457d222cc33bd839a1979214917a166a177326b72b84c92c
Now consider a transaction for 24,000 BTC:
523cf8d5b8a47f67ca64e0dd101befc10abd3e1d0f4cbf1d7246193e6e7ed60a
They came from the wallet 3HZUwxZbYRef9oEuvSvjgVMyZ227Hur7ng, which was created on February 1, 2015:
364ec0059225d988d307876cc302806e9e97b66ef9f4ac504662acb08aed025f
The June 28 transaction (purple arrow) was very large. As you can see in the chart above, this transaction preceded a reversal and movement within a strong bearish trend.
Conclusion
Based on the data above, we can see some correlation between the behavior of the bitcoin price and large transactions between wallets. The most obvious correlation is that a major transaction occurs after a strong directed bullish movement, as it was on April 9, 23, May 15, and June 28. After such transfers, a 10-20% correction began inevitably, and after the transaction on June 28, the market even became bearish.
It is also worth paying special attention to transactions on June 6 and 18. At the time when these transfers were made, Bitcoin was in a strong upward movement. If we blindly believed the indicator, we could have exited the position and subsequently lost part of the profit.
In the end, we can say that tracking specific wallets that transferred large amounts is rather useless, since mixers - many small and constantly updated wallets working in conjunction with cryptocurrency exchanges - completely erase the trace and make it impossible to track the real sender and recipient.
Statistically, large volume transfers among wallets are more likely to indicate a possible momentum decline, but it remains unclear whether this correction is due to the fact that the transferred bitcoins are sold off or it is a simple reaction of observers who, thanks to the same Whale Alert service, start to panic and sell their bitcoins, thus fueling the sale.
However, this does not mean that such alerts are completely useless. Despite the fact that we can’t talk about indicating the direction, after noticing such transactions, we can expect momentum movement. Therefore, in special cases, when this transaction occurs at the final stage of the formation of a graphic pattern or in a long trend, then we absolutely can interpret this signal as a reversal signal and at least protect our positions by moving stop signals, or even take profits and wait for the development of events outside the market.
Another important point is that really large transactions of 20,000 BTC and more are not so frequent in the market, and it doesn’t really make sense to pay attention to transactions of 1,000 BTC and less, since their influence is insignificant. Therefore, using information about transfers as a tool for additional signals, as in the case of analyzing the total volumes of Bitcoin transfers, makes sense exclusively for long-term strategies or positional trading.
Good luck!
Faithfully yours,
Michael @Hyipov
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