Bitcoin’s surge was about 45% in February. Historical data indicates that when there are exceptionally high average trader returns and minimal accumulation by whales, it tends to foreshadow a short-term correction.
Crypto intelligence platform Santiment analysts noted that Bitcoin’s impressive performance throughout the 29 days of the previous month redefined leap year, yet March could bring a different market scenario. Santiment’s monthly report highlights various on-chain indicators pointing to a potential danger zone, signaling an elevated risk of a short-term correction.
Navigating a Risky Territory
In February, Bitcoin experienced a remarkable 45% surge, surpassing key milestones such as $45,000, $50,000, $55,000, and $60,000 within a span of three weeks. However, the asset faced resistance around $67,000 and was trading around $65,000 at the time of this report, according to CoinMarketCap data.
The rally has sparked a moderate level of fear of missing out (FOMO) among investors.In addition to FOMO, both short and long-term active wallets may soon start selling their BTC holdings, given the significant increase in their average trading returns. Wallets active in the last 30 days have seen profits of over 20%, although this figure had decreased to 14% at the time of writing.
Active wallets over the past year have witnessed returns exceeding 64% (59% at the time of writing), marking the highest figures since April 2021. Surprisingly, these returns even surpass those observed in November 2021, when BTC attained its all-time high.
Moreover, there are indications that Bitcoin whales are diversifying their holdings. According to Santiment, this occurs when whales transfer some of their assets to or from exchanges for selling or holding purposes. Additionally, they might opt to distribute their coins across multiple wallets for enhanced security.
Fortunately, the proportion of BTC held on exchanges remains at levels comparable to those in 2017, indicating that assets are not being transferred to these platforms at this time.
Based on historical data, a scenario where there are exceptionally high average trader returns alongside limited whale accumulation is likely to result in a short-term correction.
The implications of recent on-chain activities are yet to unfold, but one thing is certain: March is poised to be an eventful month for the crypto market.
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