The Breakdown - Whales Unload Billions As Bitcoin Plunges To Six-Week Low

Starting point is 00:00:00 Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Tuesday, August 26th, and today we are talking about some whale selling. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. Well, friends, it has been a wild few days in crypto markets. On Friday morning, we saw a huge rally as Powell's Jackson Hole speech came in much more doveish than expected. For those of you who haven't

Starting point is 00:00:47 dived deep into that, that's what all of our coverage yesterday is all about. In any case, that move saw Bitcoin reach a four-day high of $117,000 and Ethereum reach a new all-time high of 4,850. Now, it was definitely not all of that strong a rally, given that Bitcoin immediately began giving back the gains and steadily drifted down across. the weekend. At the time of recording, Bitcoin has now plunged to a six-week low below 110,000. Bitcoin has now lost over 6% since the Jackson Hole Pump and more than 12% from the all-time high set two weeks ago. And given that this is a fairly major correction, at least by modern standards, the timeline is surprisingly optimistic. While you see a bunch of posters claiming that crypto Twitter is freaking

Starting point is 00:01:27 out, I struggled to find a single tweet actually calling for the end of the cycle. Instead, it's mostly comments like this from Crypto-Coleo, who wrote, reminder, up only season is almost here. Each bull market saw significant acceleration higher at inflection points tracing back to trend lines touching previous cycles highs. Nothing has changed. Bears will try and convince you the top is in and the bull market is over when, in all reality, the real fun hasn't even started yet. Be more bullish. Nakamoto CEO David Bailey posted, there's not going to be another Bitcoin bear market for several years. Every sovereign, bank, insurer, corporate, pension, and more will own Bitcoin. The process has already begun in earnest, yet we haven't even captured

Starting point is 00:02:05 0.01% of the TAM. We are going so much higher, dream big. Now, there were plenty of calls that this is a dip worth buying, but looking at the data, that doesn't seem to be happening. According to GlassNode, Bitcoin wallets of all sizes from the largest whales to the smallest shrimps are in distribution mode. This is a change from a few weeks ago when there was a net accumulation for most cohorts. There hasn't been a ton of distribution over the summer. That seems to have changed after the latest all-time high. Which brings us to the major trigger for this weekend's collapse. On Sunday afternoon, a Bitcoin whale liquidated 12,000 Bitcoin. Sani of Time Chain Index had been tracking this wallet all week and showed that they had liquidated 24,000 Bitcoin in total, some $2.6 billion worth.

Starting point is 00:02:47 Bitcoin hadn't been touched in six years and were originally withdrawn from HTX. Sani has linked the wallet in a cluster and believes this entity holds a total of $152,000 Bitcoin worth over $16 billion. The whale has been plowing their funds into Ethereum across spot and leveraged long positions on hyperliquid. This rotation was why the Ethereum price ripped to another all-time high on Sunday, even as Bitcoin cratered. Monday saw both crypto tokens take brutal drawdowns as the entirety of the weekend move was unwound. While the whale was clipping profits on their leveraged position along the way, the volatility took a lot of traders by surprise. Monday's continued plunge saw 640 million worth of long positions wiped out across crypto markets, with 235 million in Bitcoin

Starting point is 00:03:27 longs liquidated. This was one of the largest liquidation events we've seen in a very long time, highlighting just how rapid and unexpected the drawdown was. And yet there's still a ton of pain left. With crypto analyst Yelle writing, Bitcoin's still murdering leverage traders around the range lows, and from the looks of it, the sharks are still hungry. Would really prefer the price holds this area or will fall back into the previous range, which would open us up to another retest of 100K. Bounce, please. Now, as usual, when Bitcoin is reflexive to the downside, we get conspiracy theories of paper Bitcoin flowing through the treasury companies. VJ. Boyapati commented, though, no paper Bitcoin conspiracies are required. The

Starting point is 00:04:02 price is stalled because a number of whales have hit their magic number and are unloading. This is healthy. Their supply is finite and their selling is required for the full monetization of Bitcoin. Massive blocks of supply with enormous purchasing power are being distributed into the population. This cycle is one of the greatest monetization events in history. Bitcoin analyst Willie Wu noted that whale selling is a big trend this cycle, tweeting, why is Bitcoin moving up so slowly the cycle? Bitcoin's supply is concentrated around OG whales who peaked their holdings in 2011. They bought their Bitcoin at $10 or lower. It takes $100,000, 10K plus of new capital to absorb each Bitcoin they sell. This differential and cost basis,

Starting point is 00:04:37 the supply they hold and their rate of selling, has profound impacts on how much new capital that needs to come in to lift price. You can look at this as Bitcoin going through growing pains until these 10,000 X gain investors are absorbed. Many traders noted that zero out of 30 of the top indicators listed on coin market cap have been triggered. There are also a bunch of people looking at seasonality, noting that September is historically a very weak month that usually gives way to a rebound in October and November. Zooming out, there were a lot of people thinking through their thesis for this cycle given the drawdown. Crypto McKenna wrote, I think people framing cycle top is incorrect, given previous cycles that have all operated without Tradfai adoption. If you think we're going

Starting point is 00:05:14 into an 18-month bear market, that I would heavily bet against this. In fact, I think there will be some great trades that present themselves in 2026. Prolonged bear markets are over. Previous bears were driven by mass de-leveraging through fraud, no institutional bid, and protocols that did not have meaningful cash flows. I would implore people to get out of their head the concept of a cycle top. The future in this case looks nothing like the past and to infer from it is an error in logic. Crypto researcher Na Lake wrote, Watching Bitcoin drop from 124K to 109K hits different when you've been through every cycle. That $2 billion whale dumping after holding for seven years, I get it.

Starting point is 00:05:48 But here's what gets me. Every time Bitcoin dips, we act surprised. Like we forgot, this is the same asset that took us from $0.24k, while everyone said it was just internet money. The real ones know this drop is just Bitcoin being Bitcoin, volatile, unpredictable, but still the hardest money we've ever had. Some people panic sell. Others see opportunity. Me? I'm just grateful to be alive during the time when magic internet money became the

Starting point is 00:06:09 global reserve currency. We're not even at the final boss level yet. Take position and look towards the future. There is certainly a bit of a feeling that we're getting towards the end of whatever cycle this is, or at least that the big gains are already in the rearview, but at the same time, there are very few people who are looking for Bitcoin to collapse based purely on old whale's selling. Today's episode of The Breakdown is brought to you exclusively by Grayscale. Grayscale is almost certainly a name you know. They've been offering exposure to crypto for over a decade now and offer over 20 different crypto investment products ranging from single asset

Starting point is 00:06:45 to diversify to thematic exposure to crypto and the broader crypto industry. They have long been innovators at the intersection of TradFi and Crypto. And one of the benefits for a lot of us is that grayscale products are available right through your existing brokerage or IRA. Now, of course, investing involves risk, including possible loss of principle. For more information and important disclosures, visit grayscale.com. Go to grayscale.com to explore their full suite of crypto investment products and invest in your share of the future. Now, another issue facing markets at the moment is the new whales are also selling.

Starting point is 00:07:21 Coin shares reports that last week was the largest weekly outflow since March for global crypto ETFs. Over 1.43 billion was redeemed, ending a two-week streak that brought in 4.3 billion. Coinchair's head of research, James Butterfield, noted it had been a polarized week, writing, early in the week, pessimism around the Federal Reserve's stance drove outflows of $2 billion. However, sentiment shifted later in the week following Jerome Powell's address at the Jackson Hall Symposium, which was widely interpreted as more dovish than expected, sparking inflows of 594 million. Now, these positive inflows to end the week were largely in alt-coins, with flows for the U.S. Bitcoin ETF remaining negative on Friday. Interestingly, Monday saw positive inflows for the

Starting point is 00:07:58 U.S. Bitcoin ETFs the first over the last seven trading days. So, despite a continued drawdown, it does look like ETF traders are buying the dip. The other big buyer to keep track of is the crypto treasury companies who had a pretty big week. Tom Lee's Bitmine purchased almost 200,000 Ethereum worth around $850 million. They also added a ton of cash, increasing their corporate balance sheet by $2.2 billion total. The company now holds ETH worth almost $8 billion, making them around one-ninth the size of Micro Strategy and by far the largest Ethereum Treasury company. Micro Strategy also added some Bitcoin last week, buying around $400 million worth. Micro Strategies buying has really slowed down over recent weeks as the company's stock price fell and restricted their ability to issue

Starting point is 00:08:36 shares. Last week was an notable uptick from buys over the past few weeks, which have been in the 10 to 50 million range. Micro Strategy has only managed to accumulate 3,600 Bitcoin so far this month, down from 31,000 in July and 17,000 in June. Indeed, the entire Crypto Treasury strategy seems to be slowing down, or at least getting past the explosive growth phase we saw earlier in the summer. Ledin's CEO Adam Reid's waded on the trend, commenting, Bitcoin Treasury companies have been an incredible innovation for the space. What may be fading is the ability to get a 3x return. Micro strategy in the last five years did 24X versus Bitcoin, which did a 10x.

Starting point is 00:09:10 I can't see that happening again. The strategy is certainly getting more difficult to execute as the space becomes flooded and the first movers are becoming multi-billion dollar entities. Reads added, what's fading is the ability to create unique positions. Most of the CEOs of digital asset companies are saying that their sole purpose has to be able to generate more Bitcoin per share than you can get, but do they really have the unique management team? Do they really have unique capital connections to be able to do that and beat the underlying? Taking in the complete picture of where we are

Starting point is 00:09:36 at the moment, trader Tyler Neville commented, the general consensus is that most think we are witnessing late cycle euphoria and likely close to a market top. I'm open to the possibility that it's late innings, but I don't think we've remotely seen euphoria. I think Powell just gave the market some monetary runway until the next Fedchair gets announced. It's even possible Powell just ignited an even larger credit boom similar to 1998, allowing for more leverage in these growth sectors of the market like AI crypto robotics, frontier tech, etc. These bubbles tend to unwind when leverage gets too large and the growth narrative unwinds. So far, the only real Kappex froth is in AI. He commented that he's only ever seen Kappex bubbles unwind through de-leveraging. Giving the example of the gold bubble

Starting point is 00:10:13 in 2008, he noted that a drop in spot prices burst the bubble, the lasting damage came from a prolonged de-leveraging. Looking to AI CapEx, he noted that there's a lot of froth, but not that much leverage. Numbers are up into the right, but the hyperscalers are only just starting to move towards debt funding instead of self-financing. There's a similar phenomenon happening in crypto, with Neville commenting, the last theme everyone wants to call a top is in crypto. Remember that feeling of euphoria of the FTX leverage in Genesis lending money hand over fist? We have a lot more collateral in the crypto ecosystem now than is generating real revenue, and leverage isn't even remotely where it was in 2021. I think we're still relatively early

Starting point is 00:10:47 cycle in crypto. When the CAPEX and leverage spikes, beware. If inflation goes up slowly, this bull market has legs. If there's an outlier inflation number that spikes, stay on your toes. Watch credit spreads, but more importantly, watch the charts. We've not broken any serious downside levels yet. Most of the pullback is just washing out the fast money leveraged retail traders. Now, it could be that the crypto treasury companies are hiding the leverage on their balance sheets during this cycle, so it's not showing up in the aggregate numbers. Still, for a really violent unwind like we saw in 2022, we'd need some big buyers to turn into four sellers. So far, we haven't seen anything that looks remotely close. The cycle's drawdowns have been all about whale selling, retail liquidations, and macro shocks.

Starting point is 00:11:26 Bitcoin analyst Will Clemente reflected on how he felt during the last cycle as volatility ripped through the charts, noting that this time is very different. He tweeted, the new crypto class of this cycle will never understand how it felt to watch a random leveraged cascade followed by a cryptic-Zuzoo bullpost, plan B, posting rainbow dots, and Tribuco writing a threat about how Alameda made money off of everyone's liquidations. Simpleer times. So friends, that's where we are, 109K, but not that scary, a 109K, at least for now. In any case, appreciate you listening, as always, and until next time, be safe and take care of each other. Peace.

The Breakdown - Whales Unload Billions As Bitcoin Plunges To Six-Week Low

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