In early November, Bitcoin (BTC) dipped below psychological support at $100,000 and reached around $98,900 before regaining a six-digit valuation. While this may suggest that bearish sentiment prevails among investors, recent on-chain valuations have surfaced that explain why Bitcoin prices could see a major reversal in the near future.
Binance confirms increase in STH activity. Triggering a liquidation cascade
In a recent QuickTake post on CryptoQuant, on-chain analyst Amr Taha revealed a sudden change in Bitcoin retail activity on the Binance network. Taha’s report focuses on the “Buy/Sell (Bitcoin) LTH/STH Binance” indicator that tracks buying and selling activity on Binance and distinguishes between long-term holders (LTH) and short-term holders (STH).
Taha noted that as of November 3 and 5, Binance recorded a significant increase in Bitcoin STH sales activity, particularly from holders known as “clown wallets.” On November 3rd, approximately 251 BTC flowed into Binance, and on the 5th of this month, an even larger amount of approximately 517 BTC was transferred to Binance.
Because these STHs are typically panic-prone, their positions often serve as liquidity for long-term crypto holders who seize opportunities to accumulate amid fear-driven retail markets.
Meanwhile, analysts highlight the results of BTC:Binance Liquidations Delta, an indicator that measures the difference between long and short liquidations on Binance, thereby revealing whether more long or short positions are being forced to close.
According to Taha, most of the recent liquidations appear to have been long positions that entered the Bitcoin cycle too late and were highly leveraged. These positions were forced to close within the $107,000 to $100,500 range, creating a phenomenon commonly known as a long squeeze. For context, a long squeeze is a series of sell-offs that follows after traders with overleveraged long positions are threatened or wiped out.
A long squeeze usually causes a rapid drop in price, but it does not pose a significant problem for long-term investors in cryptocurrencies. As a result, long-term Bitcoin holders have historically viewed these events as an opportunity to accumulate, thereby acting as a soft cushion against sharp drops in the cryptocurrency’s price. If past trends repeat, BTC could quickly reach a price bottom, followed by accumulation and price expansion.
BTC price overview
As of this writing, Bitcoin is valued at approximately $103,500. According to data from CoinMarketCap, the cryptocurrency has grown by more than 2% in 24 hours.
Featured image from Unsplash, chart from Tradingview.com
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