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The world’s largest cryptocurrency has been seesawing around $46,000 after multiple failures of breaking $47,000. On Wednesday, it even plunged to $43,000, breaking several moving averages. Bitcoin is finally making some big moves and we can expect the next few days to be highly volatile.
Bitcoin whales contribute to 90% of money flows into exchanges
Since late 2020, institutional investors have raced into the crypto markets and contributed to the boom of cryptos in 2021. According to the latest data of CryptoQuant, the “exchange whale ratio”, an indicator that measures the amount of top 10 transactions compared with the total inflows of exchanges, has reached 0.9. This indicates that the top 10 transactions made up for about 90% of the total inflow in exchanges, meaning the recent inflow activities are highly aggregate.
Bitcoin whales make up a high proportion of investment is not new to the market. But when this indicator reaches such a high ratio, it could very well mean that we should prepare for some sell-offs, as investors usually move their bitcoins to exchange when they plan to sell them. In fact, the ratio has been increasing for the past few months, coinciding with the bearish trend of bitcoin. It could also explain the sharp sell-off we saw on Wednesday. If this indicator remains high, the market would be vulnerable to violent moves.
More painful pumps on the way?
The bitcoin market may be hit by a painful sell-off soon. On-chain data showed that a very old bitcoin address was activated a week ago and 170,031 BTC was transferred out of the address. This address holds a total of 500 BTC and had not been activated for 10.5 years. Some speculated that the address owner was planning to take profits considering the weakness of the market recently. The sudden move of the address raised concern among the market whether it was a sign of sell-off. Although one address selling a significant amount of BTC may not have a big impact on the market, it certainly influences the market sentiment – which has been going down and fearful lately. Anyhow, traders are advised to monitor the market closely and prepare for volatility.
MicroStrategy purchases 1,914 BTC – is now the time to buy the dip?
Amid the bearish market sentiment, MicroStrategy shows utmost confidence in bitcoin, purchasing 1,914 BTC at an average price of approximately $49,229 per bitcoin. Currently, the company holds approximately 124,391 bitcoins at an average purchase price of approximately $30,159 per bitcoin. Although bitcoin has suffered significant loss from its plunge from the all-time high, the company still made $2.16 billion off its bitcoin holdings.
“We believe that Bitcoin represents a great long-term investment for the shareholders,” said CEO Michael Saylor. The company commented that it is considering generating yield with its holding and one way to do so would be lending out bitcoin. Adding bitcoin into company portfolios is getting common for big companies to hedge risks. Billionaire investor Ray Dalio advised that investors allocate 2% of their money to buy bitcoin.
How to prepare for market swings?
It seems that the next weeks would be challenging and wild for bitcoin. In times of uncertainty, a good way to survive is to diversify our strategies and portfolios. It is important to figure out your risk tolerance and only invest money you can afford to lose. Here are two options worthy of considering.
Option 1: A Wallet Designed for Traders and HODLers
An interest wallet is a safe haven to store your bitcoin. With up to 21% annualized interest, you can grow your wealth without taking the risks of trading. You can withdraw your deposit anytime you want or transfer the bitcoin into the trading account instantly.
Option 2: Managing Trading with Lower Risk
Futures trading enables traders to earn profits regardless of which direction bitcoin goes. By predicting the right trends of Bitcoin’s price, traders can earn greater returns within a shorter period of time.
Assume we used 1 BTC to open a short contract when bitcoin was trading at $50,000. Please note that with 100x leverage, 1 BTC can open a contract worth 100 BTC.
When the price of bitcoin dropped to $48,000. The profit will be ($50,000 – $48,000) * 100 BTC/$48,000 *100% = 4.16 BTC.
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