Here’s How History Says Selling Bitcoin is Not a Wise Move

Last week was quite disorienting for Bitcoin holders. Between the extremes of being overly bullish and overly bearish, facts speak for themselves. If you are considering selling BTC, take note of these important indicators.

Bitcoin Crash Contextualized

As previously noted, Bitcoin’s historic crash in terms of liquidations was quite anomalous in three important aspects:

• Panic-sellers who onboarded Bitcoin in the last 3-6 months were the driving force for Bitcoin’s price drop, not institutional investors.
• They were spurred on by “news” that China’s was “cracking down” on Bitcoin. Precisely that phrase had been deployed multiple times previous years. This added bearish gas to fire, already poured by Elon Musk’s defamation of Bitcoin as ecologically unviable.
• Bottoming of Bitcoin’s price to one it had in January, served to trigger a Bitcoin buying spree among whales.

So far, during the crypto market chaos that shut down many exchanges, whales bought 122,588 BTC according to Glassnode data. Reminder, whales are crypto holders in possession of at least 10k BTC. This makes them capable of exerting enough force in the market to make it either bullish or bearish. For example, Michael Saylor now holds 111k BTC.

As a whale, if he had said the opposite in that tweet – that he would sell all BTC – he would eclipse Bitcoin’s crash done by thousands of panic-sellers with smaller holdings. Altogether, they sold about 60k BTC. Based on 185,156 votes in Michael Saylor’s poll on Saturday, the selling sentiment is clearly in minority, affecting mostly those who had recently bought Bitcoin.

In other words, the Bitcoin market remains bullish, but its current resistance level seems to be at around $43k. Succinctly put, those who were unaccustomed to crypto volatility became overly bearish while those more experienced either hodled or bought the dip. Another way to look at it is this – Bitcoin’s market recovery is more likely than selling now and then hoping to rebuy BTC at a lower price.

No-Coiners Are Taking Clues from Whales

Restatement of a restatement of old news that China is “cracking down” on Bitcoin certainly had a powerful impact on many retail investors who only recently bought BTC. However, news that Bitcoin whales remain undaunted has an equally powerful effect.

Just today, a recording emerged of Ray Dalio, the hedge fund manager of Bridgewater Associates with $140 billion AUM. In the video recorded on May 6^th at the 2021 CoinDesk Conference, he speaks of Bitcoin in significantly positive terms.

“Personally, I’d rather have bitcoin than a bond. And then the more that happens, then it goes into bitcoin and it doesn’t go into credit, then [governments] lose control of that.”

It is now confirmed that Dalio holds BTC, which means it is likely he will buy more. His greatest fear is not doubting Bitcoin’s fundamentals as digital gold, but the fear that its success would make it a target for governments.

The Tokenist has touched this subject on many occasions, noting that Bitcoin is not technologically bannable but isolable from interfacing with fiat currency. Speaking of Bitcoin interfacing with exchanges, its supply has hit a record low, with 78% of Bitcoin illiquid – not accessible for buying.

This is another indicator that Bitcoin remains in the bullrun arena. Moreover, the glaring contrast between whales buying the dip and newcomers succumbing to panic-selling is having the effect of increasing new BTC addresses.

Stablecoins Make a Resurgence

As crypto space lost around 30% of its market cap, stablecoins have upgraded their market cap rankings. Tether (USDT) is now just behind Ethereum at 3rd rank with a $59 billion market cap. Its closest competitor, USDC, rose to 9th rank with a $20.6 billion market cap. This is not surprising.

As a bridge between fiat money and cryptocurrency, many investors use stablecoins as easily-accessible and tokenized cash pools to buy or sell BTC or altcoins. Prior to Coinbase listing on Nasdaq, demand for stablecoins was so high that their pegged USD-price pushed above 1:1 ratio in favor of stablecoins. That time, stablecoins served the role for exit strategy.

In the last 24 hours, 300 million USDT had been transferred to FTX exchange, in preparation for similar moves. However, unlike centralized stablecoins – USDT and USDC – which either maintain or overperform their USD pegs, algorithmic stablecoins caused some concern.

TerraUSD (UST) is a decentralized stablecoin that algorithmically burns or mints tokens to maintain 1:1 USD peg ratio. During last week’s market turmoil, its peg-price dipped to $0.94.

Another such stablecoin, Ampleforth (AMPL), performed even worse, dipping to $0.551 on May 23^rd. Between the two novel stablecoins, it seems there is much space for improvement given the gap in pegging performance.

Join our Telegram group and stay connected to all things crypto, DeFi, and finance.

It seems Bitcoin’s fortunes increasingly depend on whales – hedge fund managers and heads of large corporations. Do you think their presence in the crypto market will make them exert enough influence to thwart any de-regulatory attempts?