Bitcoin whales are profiting as 'weak hands' sell BTC throughout $40K bull run
Comment of the Day

January 11 2021

Commentary by Eoin Treacy

Bitcoin whales are profiting as 'weak hands' sell BTC throughout $40K bull run

This article by William Subery for may be of interest to subscribers. Here is a section:

While institutional buy-ins have become the standard narrative of Bitcoin over the past few months, a rogue “weak hands” signal from one of them caught analysts’ attention this week.

As Cointelegraph reported, Guggenheim Partners, which announced a sizable fund allocation to BTC in late November, is allegedly planning to sell some of its holdings already. The trigger came from chief investment officer Scott Minerd, who on Monday said that Bitcoin’s weekend drop provides the impetus to rethink its position.

“Bitcoin's parabolic rise is unsustainable in the near term," he wrote. "Vulnerable to a setback.”

“The target technical upside of $35,000 has been exceeded. Time to take some money off the table.”

His suggestion appeared to confuse market participants, with responses questioning the rationale behind the decision, coming just weeks after Guggenheim’s initial entry.

“CIO of huge firm day trading btc? It's a 5-10yr hold minimum,” macro investor Dan Tapeiro argued.

Institutional uptake comes amid a more fundamental supply and demand squeeze for Bitcoin, with large buyers already outpacing what miners can produce each month. At the same time, miners have stepped up their sales in recent days in what one theory suggests is some well-earned profit-taking at or near all-time highs.

Eoin Treacy's view

The ownership of bitcoin has become more concentrated over the last six months because institutions have been buying in size. Meanwhile the concentration of mining in a handful of companies is detracting from the decentralised argument for bitcoin. Both of these factors contribute to the speculative nature of the market but detract from the long-term store of value argument.

During the big run-up in 2016/17 reactions of 40% were considering buying opportunities by the masses. There were eight reactions of between 30% and 40% between late 2015 and the peak in December 2017. In that time the price went from $200 to $19000.

My primary point in monitoring the consistency of the trend in bitcoin has been that reactions of 20% have been “normal”. In any trend the size of reactions is often the most consistent feature.
The reason for that is because in any trend traders look to buy the dip. The only way to decide when to buy is to look at how much it pulled back before. When buying the dips stops working the trend is over.

Today’s pull back was very jarring. The peak to trough swing has been in the order of 27% and at the time of writing that had been reduced to 22% with some dip buying underway.

The one thing to always remember with cryptocurrencies is they are completely unregulated. The kinds of shenanigans that were common in the stock market in the early 1900s are being repeated in the cryptocurrency markets. That means front running, spoofing etc. are all common practices. The only measure of reality is the price action.

This reaction is the largest so far and that is an inconsistency. It is also pulling back into the underlying range which is an additional inconsistency for what had been a staircase step sequence advance. That suggests today’s low needs to hold if the trend is to remain intact.

Perhaps the most important is that bitcoin led the stock market’s response to tighter financial conditions in early 2018. If this turns into more than a very short-term peak for bitcoin is may act as a lead indicator for the wider market.    

Back to top

You need to be logged in to comment.

New members registration