In This BTC Dip, Retail is Selling – and Whales are Buying
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In This BTC Dip, Retail is Selling – and Whales are Buying

Data reveals a very important trend regarding the ongoing dip - and the future prospects of Bitcoin.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

With Bitcoin’s recent dip, falling by 42% in one week, many people are left wondering why exactly this happened, and who is to blame. This is a deceptively complex question, as cryptocurrency has a long history of rising and falling for seemingly unknown reasons. However, a report from Chainanalysis suggests that more retails investors have sold BTC than institutions.

Retail Investors are Panic Selling

Statistics from Chainanalysis show that Bitcoin selling is happening mostly from addresses held on exchanges. This is a strong indicator that it is retail investors selling, as they are more likely to leave their money on an exchange rather than withdraw it. This is also the case for day-traders, as they usually leave their funds on an exchange in case they need to quickly sell. 

Institutions, on the other hand, are more likely to take their money off an exchange and keep it in a wallet with more secure storage. This is largely because they invest in very high numbers. Chainanalysis statistics also show that post-2017 whales (wallets that have held at least 1,000 BTC at some point in their existence) appear to actually be buying the dip, rather than selling it. 

Chainanysis notes that “Bitcoin investor whales increased their holdings by 34k bitcoin in the last two days as price fell”. In other words, whales are enjoying the low Bitcoin prices that we are currently seeing. Glassnode’s stats appear to agree with this, too. In their weekly report, they revealed that “larger buyers remain in active accumulation during this correction”, especially in the US, where institutions favor Coinbase. 

Glassnode also revealed that newcomers to the crypto markets are the ones mostly selling, whereas longterm holders have been less active overall. This is likely because newer entrants will have bought Bitcoin when it was $30,000+, and so their gains would have been less than those who managed to acquire of Bitcoin when it was close to four figures.

Essentially, retail investors have been panic selling, which has been causing the price to tumble. It is not caused by whales exiting the market en masse, rather the contrary– whales might be saving the market right now, by both holding, and buying the dip. In fact, we know of at least one company that has chosen to buy Bitcoin during these times. Microstrategy revealed that they bought another $10 million BTC as of May 18th.

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What Triggered this Bitcoin Crash?

Retail investors might be causing the price to continue falling, but this does not answer the question of why they initially chose to sell. Fingers are being pointed at two factors, the first of which is Elon Musk’s rejection of Bitcoin due to its energy consumption. The beginning of the Bitcoin crash certainly aligns with Elon Musk’s announcement that Tesla would discontinue its support of BTC purchases.

The second factor is that people are fearful that China will embark on stricter BTC regulations. Whether China will actually crackdown on Bitcoin is hard to say, but as 65% of Bitcoin miners are located in China (as of 2020), it is understandable why people got worried.

Of course, these are things that would naturally worry retail investors more than most whales. Institutions are not likely to care about what Elon Musk says, and corporations may know enough about China’s government and business practices to not be overly concerned. 

The next few days will be fascinating for Bitcoin. The activity we are seeing could turn out to be a blip, with BTC slowly climbing back to its all-time-high, or it could signify something much bigger, with the price going into freefall.

Do you think institutions are currently helping the price of Bitcoin? Let us know in the comments.