Retail Dumps Bitcoin (BTC), Whales Go Heavy on Ethereum (ETH)

Retail investors appear to be offloading Bitcoin, even as large Ethereum holders significantly increase their stash.

This depicts a clear divergence in market behavior.

Diverging Strategies

On-chain data shared by CryptoQuant shows that the 7-day moving average of Bitcoin inflows from short-term holders (STHs) to Binance surged from around 10,000 BTC to over 36,000 BTC by the end of July. This dramatic rise in exchange deposits typically signals an intent to sell, particularly when prices have recently climbed.

The timing aligns with Bitcoin’s rally to local highs, which prompted retail investors to lock in profits rather than holding through potential volatility. This ultimately led to a pullback near $114K on August 1st.

On the other hand, whale behavior surrounding Ethereum indicated a long-term bullish outlook. On July 31, whale wallets were observed withdrawing over $900 million worth of ETH from centralized exchanges. Such large-scale activities are often interpreted as accumulation, with whales moving assets into cold storage to hold off-market.

These opposing flows, Bitcoin flowing in, Ethereum flowing out, highlight a strategic split – retail BTC investors are opting for near-term exits, while whales appear to be positioning for future upside in ETH.

This divergence is unfolding against a broader macroeconomic backdrop. The US Federal Reserve’s recent decision to maintain current interest rates, while expected, has renewed institutional interest in crypto.

Retail investors, however, are reacting with more caution. Their moves point to a desire to de-risk, while larger players are taking advantage of the macro clarity to build long-term positions. The result is a familiar market dynamic – retail sells into strength, while whales accumulate in silence.

This behavioral split becomes even more pronounced when examining volatility trends and the options market.

ETH-BTC Volatility Gap Widens

In a statement to CryptoPotato, on-chain options venue Derive.xyz revealed that the volatility gap between Ethereum and Bitcoin is widening. In fact, ETH’s 30-day volatility is now 30% higher than BTC’s, up from 24% a month ago. This growing divergence reflects renewed investor interest in ETH, fueled by the emergence of treasury-backed ether firms like Ethermachine and Bitmine, as well as its 10th anniversary.

Meanwhile, the end of July saw a significant wave of realized profits, of around $6-8 billion, which indicated that institutions may be de-risking ahead of what’s expected to be a turbulent third quarter.

The options market appears to be tilting bearish, as evidenced by BTC 30-day skew, which flipped from +3% to -1.5%. This means that puts are now priced higher than calls and hints at a “strong demand for downside insurance, as traders expect one to two months of bearish price action.”