In the absence of significant selling pressure and no major bearish news, the volatility of BTC has been amplified. There are two reasons for this: one is the liquidation of leveraged positions, where the rapid decline has led to a chain reaction of long contract liquidations. I don't think I need to list the data, as the participants are already aware of this. The second reason I want to emphasize is the drying up of liquidity!
The current market is lacking in liquidity, which the participants should also be aware of. But what they may not know is the composition of the capital size of the liquidity that is gradually withdrawing.
(Figure 1)
Figure 1 shows the on-chain settlement volume of BTC, categorized by scale. I have grouped all the amounts less than $1 million (retail group) together. Prior to September 2023, the retail group's participation in on-chain liquidity reached 57.5%. As the price of BTC rose higher and ETFs were approved, this proportion began to decline, reaching a low of 28% in December 2024.
Subsequently, BTC consolidated around $100,000, and the proportion of this group in liquidity began to rebound, reaching 36% as of February. This indicates that the retail group, influenced by media hype, started FOMO-ing into higher price expectations and actively taking on high-priced positions. So, what were the whales doing at that time?
(Figure 2)
Figure 2 shows the on-chain settlement volume of the whale group (amounts greater than $10 million). The overall trend is the opposite of the retail group. From April 2023 to November 2024, the whale group's participation in liquidity increased from 30% to 62%. This fully demonstrates that more and more large capital has been participating in the game, which is the main contributor to BTC's rise from $26,000 to $100,000.
However, after BTC broke above $100,000, the whale group's participation began to decline. From November 2024 to February 2025, the proportion dropped from 62% to 38%. It is evident that as the retail group began to anticipate BTC reaching $200,000 or even higher, large capital is gradually withdrawing from liquidity. This echoes the classic saying - any FOMO is for the orderly exit of capital.
(Figure 3)
Additionally, there is a group of high-net-worth individuals (amounts between $1 million and $10 million). This group's fluctuations in market liquidity participation are not as significant, but the changes in their participation proportion are more aligned with the whale group's behavior. The high-net-worth group has gradually withdrawn from liquidity since January 2025, declining from 36% to 30% currently.
From the observations of the above data, we can draw a conclusion: when market liquidity begins to decline, the first to exit are the whales with super-large capital volumes, who often have more powerful resources, teams, and superior information acquisition capabilities. Subsequently, the high-net-worth group also starts to withdraw, leaving only the retail group behind.
When liquidity is severely lacking, and a large amount of positions are concentrated in a small range, the volatility of prices will be amplified. So, who is the culprit? Is it the large capital? No, without their participation, BTC would not have reached $100,000. Is it the retail group? No, either... This is the market, and when you cannot set the rules, you can only choose to follow.
The gradual withdrawal of large capital from liquidity is reasonable, and we can see some clues from another set of data.
(Figure 4)
Figure 4 shows the realized profits categorized by wallet size. I have grouped the whales holding 1,000-10,000 BTC together, and it is very clear that in the three cycles from 2017 to 2025, whenever the large wallets start to intensively realize their profits, it is the time when a new strong trend is about to start. As the profit-taking decreases, the trend is approaching its end.
So this data can be cross-validated with the data on the withdrawal of large capital from liquidity. When a large amount of profits are realized (profit-taking), their participation proportion naturally declines.
In summary:
1. In the process of market liquidity shrinking, the withdrawal of the whale group has the greatest impact, which is even more detrimental to the already scarce liquidity.
2. BTC has gradually become a battlefield for capital games, and whoever has the stronger fist will have the say. When the whales have completed their profit realization, the current trend cannot be maintained for long.
3. In May 2024, the whale group's participation proportion also dropped to 27%, but by August and October, they had returned to 58%. Therefore, the current withdrawal does not mean they will not come back in the future.
4. It is not necessary to be overly pessimistic and say that the current trend is about to turn bearish. When the whale group's participation was at its lowest of 27% in May 2024, the current 38% is still higher. Therefore, I personally believe that the end of this trend does not mean there will not be a next trend.
5. Keep an eye on these super-large players, and when they start to quietly change, that is the time we should make our decisions.
