Bitcoin rally could stall as whale selling suggests potential pullback

Bitcoin has enjoyed an impressive rally over the past week, as its price has shot up 11%. The Bitcoin rally has carried the flagship cryptocurrency from trading at a low of $10,530 on October 8 to hitting a high of $11,740 on October 12.

But despite those significant gains posted in such a short period, multiple technical indexes suggest that a correction could be coming, potentially ending this latest Bitcoin rally. 

Institutional interest rises, while BTC whales dump

At first glance, you might think that everything is lining up for Bitcoin to surge past the $12,000 mark and march towards new yearly highs. In fact, another multi-billion dollar company revealed that it is holding more than 10,000 Bitcoin, worth approximately $115 million. Stone Ridge now joins more than 15 publicly traded companies that are holding cryptocurrencies on their balance sheets. 

The increasing interest from institutional investors is a positive development for the crypto industry as a whole. While governments and central banks worldwide continue to clamp down on crypto, rising demand for this asset class could force global financial watchdogs to ease regulations and accept this growing trend. Robert David Gutmann, Head of Digital Asset Strategies at Stone Ridge, said he believes more companies will rethink their portfolio composition and embrace Bitcoin, due to the state of the global economy. 

As more institutions join the cryptocurrency market, a number of whales have capitalised on the recent Bitcoin rally to offload some of their holdings. On-chain data reveal that the number of addresses with 1,000 to 10,000 BTC continues to drop, even as prices trend upward. Since October 8, nearly 10 whales have left the network or redistributed their tokens. 

This sort of bearish divergence between prices and the number of BTC whales is quite alarming. It may suggest that Bitcoin is headed for a sharp correction before making another attempt to hit higher highs. 

Sell signals begin to pop up, threaten Bitcoin rally

The Tom Demark (TD) Sequential indicator adds credence to the pessimistic outlook. This technical index is currently presenting sell signals on Bitcoin’s daily chart. The bearish formations developed in the form of a green nine and a sequential 13 candlestick. 

A further increase in the selling pressure originating from BTC whales may help validate the scenario provided by the TD setup. If this were to happen, the bellwether cryptocurrency could retrace for one to four daily candlesticks before a potential Bitcoin rally resumes. Such a downswing could see Bitcoin drop and look for support around the 50-day moving average, which currently sits around $10,800. 

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Due to high demand from institutional investors, it’s still possible that the recent Bitcoin rally continues nonetheless. If Bitcoin were to rise above its recent high of $11,740, all the sell signals previously mentioned could become invalidated. Moving past this level of resistance would see BTC aim at the next important area of interest that lies between $12,000 and $12,500. 

Key price levels to watch

Investors should pay close attention to the $11,300 support level, and the $11,740 resistance level. These price hurdles will determine where Bitcoin is headed next. Slicing through support would likely validate the bearish outlook previously presented and lead to a steep correction towards $10,800.

Meanwhile, a sudden spike in buy orders behind the flagship cryptocurrency could allow Bitcoin to break above its recent point of resistance. If that happens, it could signal that the Bitcoin rally is getting stronger, with a potential surge to $12,000, or even $12,500, ahead.