The Bitcoin (BTC) market has been anyone’s guess over the past few weeks. As the market has seen dramatic jumps, and slow slides, many have remained on the sidelines, waiting to see what happens.
However, recent buying activity has indicated that larger buyers, sometimes called ‘whales,’ are entering the market. The general understanding is that those who buy such large volumes are likely aware of market forces, and could be timing the bottom. One popular user in the cryptocurrency trading space, @cryptodemedici, tweeted about whales potentially buying in while we’re at a bottom.
Close to bottom. Whales buying big time. https://t.co/iUJCpvUqtI
— Lord Tulips de' Medici MD (@cryptodemedici) November 22, 2019
What the Whale?
The end of October saw a massive jump in the price of BTC, with a three-day rise of over $1500. Since that spike, however, the market has bled most of those gains out. The most recent pricing is below $7,500 per coin, less than half of the highest point for the year.
Just as at the end of 2018, many are hoping to see a bottom, and to buy in and maximize profits on the run-up. The difficulty, of course, is timing this event, and buying in at the least possible loss factor.
Large ‘whale’ buyers are often an indicator that the market has seen a bottom. While not always the case, when whale buyers appear in the market, things begin to shift.
Supply the Demand
Simple supply and demand mathematics explains this action in the market. When whales sell large volumes of Bitcoin, the market generally has more liquidity than it needs (supply increase) and the price drops.
As the price drops, many long positions must close, and the market continues to flood, often resulting in dramatic losses in short times.
On the other hand, when whales buy into the market, liquid supply is greatly reduced, and the market generally jumps. Even relatively minor jumps can result in a ‘short squeeze,’ as short positions must be filled by investors. This can lead to dramatic rises in the short term.
Interestingly, the whale action can often create the very demand it seems to represent. When whales buy, the market pays attention. Many smaller investors are tempted to move into the market because of a fear of mission out (FOMO), resulting in artificial increases.
Whether the whale buyers are harbingers of better markets, or simply large, bad investments remain to be seen. However, whale buyers are generally a signal of positive times in the short term.
Images are courtesy of Shutterstock, Twitter.
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Images courtesy of Shutterstock, Trading View and Twitter.