The world’s largest cryptocurrency hovered around $46,000 after several failed breaks from $47,000. On Wednesday, it even dipped to $43,000, breaking several moving averages. Bitcoin is finally taking big steps and we can expect the next few days to be very volatile.
Bitcoin Whales Contribute to 90% of Money Flows to Exchanges
Since late 2020, institutional investors have flocked to the crypto markets and contributed to the crypto boom in 2021. According to the latest data from CryptoQuant, the “exchange whale ratio,” an indicator that measures the amount of 10 first trades relative to total trade inflows, reached 0.9. This indicates that the top 10 transactions accounted for approximately 90% of the total inflow into exchanges, meaning that recent inflow activity is highly aggregated.
Bitcoin whales represent 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 selling, as investors usually move their bitcoins to exchange them when they plan to sell them. In fact, the ratio has been rising for a few months, coinciding with bitcoin’s downtrend. This could also explain the strong selling we saw on Wednesday. If this indicator remains high, the market would be vulnerable to violent movements.
More painful push-ups on the way?
The bitcoin market could soon be hit by a painful sell-off. The 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 owner of the address was planning to take profits given the weak market lately. The sudden address move raised concerns in the market as to whether this was a sign of selling. While an address selling a significant amount of BTC may not have a big impact on the market, it certainly influences market sentiment – which has been down and fearful lately. Either way, traders are advised to watch the market closely and be prepared for volatility.
MicroStrategy buys 1,914 BTC – now is the time to buy the dip?
Amid the bearish market sentiment, MicroStrategy is showing the utmost confidence in bitcoin, buying 1,914 BTC at an average price of around $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 suffered significant losses following its fall from the all-time high, the company still earned $2.16 billion on its bitcoin holdings.
“We believe Bitcoin represents an excellent long-term investment for shareholders,” said CEO Michael Saylor. The company said it plans to generate returns with its stake and one way to do that is by lending bitcoin. Adding bitcoins to corporate wallets is becoming common for large corporations to hedge risk. Billionaire investor Ray Dalio advised investors to allocate 2% of their money to buying bitcoins.
How to prepare for market fluctuations?
It looks like the next few weeks will be tough and wild for bitcoin. In times of uncertainty, a good way to survive is to diversify our strategies and portfolios. It is important to determine your risk tolerance and only invest the money you can afford to lose. Here are two options worth considering.
Option 1: A wallet designed for traders and HODLers
An interest wallet is a safe haven to store your bitcoins. With up to 21% annualized interest, you can grow your wealth without taking the risk of trading. You can withdraw your deposit at any time or instantly transfer the bitcoin to the trading account.
Option 2: Manage trading with lower risk
Futures trading allows traders to make profits regardless of the direction bitcoin is going. By predicting good Bitcoin price trends, traders can achieve greater returns in a shorter time frame.
Suppose we used 1 BTC to open a short contract while bitcoin was trading at $50,000. Please note that with 100x leverage, 1 BTC can open a contract worth 100 BTC.
When bitcoin price fell to $48,000. The profit will be ($50,000 – $48,000) * 100 BTC / $48,000 * 100% = 4.16 BTC.
Bexplus offers 100x leverage on BTC, ETH, DOGE, ADA and XRP futures. No KYC is needed and it is available for traders from the United States. If you are a beginner, the demo account is really useful for you to improve your trading skills in a real environment without worrying about losing money.
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