31st May 2021
What the Major Players are Doing during the Crash
Chainalysis uses a data-based approach in this article to analyse the differences between major and retail investors when faced with a crash on 19 May.
There are four other times in Bitcoin’s history since 2017 when it has fallen by more than 25% in less than seven days.
- On 24 December 2017, price fell from the peak of US$20,000 during the bull in 2017
- On 5 February 2018, price fell below $10,000 after the end of the bull market
- On 25 November 2018, the winter for cryptocurrency set in and price plummeted to $4,000
- In mid-March 2020, the price fell to $4,000 as financial market reacted to the Covid-19 outbreak.
When Coinbase went public, it means the coins become mainstream. Mainstream does not simply signify liquidity, it also implies more issues on environmental protection, user cases, illegal activity, and regulations.
Is it over this time? The author suggests the otherwise as it is significantly different from the previous plunges. While retail investors are selling off, the big players in the market are not – they are simply buying. The cost curve indicates that there is support for bitcoin at $38,000.
What is more noteworthy is how much money investors have used to purchase their current bitcoin positions: up to $410 billion in cost, $300 billion of which has been swallowed and vanished at $36,000, but the remaining $110 billion is still a profit, which is still more than it was before March 2020. It suggests that holders will have a huge incentive to tackle the problem rather than just walk away.
412,000 bitcoins entered the exchange three days before the crash, while 412,000 filled the same on 12 March.
The next chart further confirms this idea: it shows how post-2017 megawhales’ bitcoin holdings have changed over the 14 days before the current and past falling prices bottomed out. Post-2017 megawhales are self-hosted wallets, holding at least 1,000 bitcoins over their lifetime, acquired from the beginning of 2017, and retaining at least 75% of the bitcoins they receive.
The post-2017 investor whales bought 34,000 bitcoins on Tuesday and Wednesday, May 18 and 19, while cumulatively reducing its holdings by as much as 51,000 bitcoins in the past two weeks. This is a stronger response than in March 2020. The whales currently appear to be cautious, but overall the low prices seem to be tempting them to buy but not sell on dip.
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