Important lessons retail traders can learn from Bitcoin whales
On the one hand, Bitcoin’s price breaking above $34,000 and $35,000 might have started an endless debate on whether there will be a spillover to other cryptocurrencies or not. On the other hand, another critical debate relates to the whale movement associated with the market’s top cryptocurrencies.
This is a crucial debate, especially since the recent sell-off on spot exchanges was attributed to mid-level retail traders. Further, whales and Bitcoin wallets holding 1000+ Bitcoins have gone up considerably. The same is true for Ethereum as well, with the number of addresses HODLing 10000+ Ethereums increasing every day.
Now, this number is expected to continue rising in the future, based on data from Santiment. In the case of both top cryptocurrencies, $BTC and $ETH, mid-tier holders are taking major profits, but top-tier whales are not, which is why perhaps, one can call either market a whales’ playground. Any upcoming correction in Bitcoin’s price may pave the way for further price discovery beyond its latest ATH, based on data from CoinMarketCap.
The current market activity indicates that more and more institutional investors are entering the market and generating consistent demand that is driving the price higher. Retail traders may be selling for profits, but whales have not yet started booking their profits.
Bitcoin may have breached the $35,000-mark at the time of writing, but it is important to note that when BTC did correct itself a few days ago, the same didn’t affect its trade volume on spot exchanges. 24-hour volume on exchanges like Binance, Coinbase, and BitFinex highlighted the positive sentiment, and while there is selling, demand is being sustained based on exchange order books.
Though retail traders may be betting on the outcome they wish to see, institutional traders are buying systematically with the long-run perspective in their minds.
one of the bigger mistake i very often see "investors" make is a betting on an outcome they fantasize about
as opposed to the outcome most likely to occur
— 찌 G 跻 じ ⚡️ ? (@DegenSpartan) January 5, 2021
Looking at Bitcoin’s price chart right now, MicroStrategy’s average price of $19,400 per Bitcoin doesn’t seem as bad as it did back when the price was below $19,000. What retail traders could do at this point to differentiate is run with these institutions. The buying has persisted and the price may rally and fuel further price discovery if demand is being generated.
The rise in wallet addresses and the surge in trade volume indicate further price discovery and retail traders can support the narrative by watching the movement of whales. It may seem like a contrarian view by looking at Bitcoin’s price chart, however, the last 2 weeks of 2020 were about contrarians and this may carry forward into the first few weeks of 2021.