What did the whales do?

crypto May 24, 2021

Crypto whales are wallet addresses that hold over 1,000 bitcoins. The concept of whales in financial markets are nothing new. By holding a significant portion of an available asset, a whale reduces the volume that’s freely traded by the rest of the market. This results in a combination of increased volatility and decreased liquidity.

What happened?

Let's start from the top, when our boy Elon joined in on the energy-related FUD (fear, uncertainty, and doubt) and kicked off the recent bitcoin sell-off.

The price of bitcoin on May 12th, 2021 was trading at nearly $59k before Elon tweeted Tesla's intention to stop accepting bitcoin as a form of payment. This sent the price plummeting to $47k on the same day. If that wasn't enough, Elon added the cherry on top when he replied to @CryptoWhale's tweet a few days later, "Indeed".

Speculators immediately understood this as validation that Tesla would be selling their remainder (~$1.4 billion worth of) bitcoins. See below for a timeline of tweets along the bitcoin price chart.

But what else?

Even though Elon played a pivotal role in this sell-off, there were other factors at play here. In the same week, we saw new regulations on cryptocurrencies in China. This was an expanded version of the same regulations that were set out in 2017 by China, essentially banning any services associated with crypto to be allowed by any institutions operating in China. This means that any crypto lending, insurance, staking, etc. would also be banned in China.

Enter stage left: the real sell-off

It has been widely understood that a large portion of Bitcoin mining occurs in the Xinjiang province of China due to the overabundance of coal reserves which makes energy consumption cheaper in the region. With regulatory action looming over the miners in China, these Bitcoin whales (holding upwards of 10,000 BTC) synchronized selling with Elon's tweeting.

During this time, our on-chain Bitcoin research showed massive daily inflows of 10-20k bitcoins to exchanges. This was quickly followed by market sells and over 800,000 liquidated leveraged accounts in under 24 hours.

Please, no more FUD!

Even though the price action on bitcoin has not been favourable, we believe what has transpired is overall very good for the future of Bitcoin (and renewables).

Everything we know about Bitcoin and why we entered into this movement remains unchanged. Miners (and retail) panic sold, other miners began transitioning their operations to other countries and holy smokes, a ton of people bought the f-ing dip.

An opportunity

With more crackdowns in China, doors around the world have opened to further decentralize the future of Bitcoin. We believe this poses an immense opportunity to redistribute Bitcoin around the globe with a greater importance on utilizing renewables for mining.

Wen moon, wen lambo?

Nothing in the macroeconomic backdrop has changed. In fact, things look sharper than ever. We have seen more reports around increased inflation, higher levels of state-backed censorship, and dollar devaluations. Current prices look cheap against a bullish long term outlook (not investment advice).

Don't be silly

Please stop buying $-coins... or at least, if you are going to buy them, do so for their respective value propositions vs pure speculation. People have asked us which coins are under $1 right now so that they can buy them up. You need to be smart with your investments – if it comes easy, it will go more easily. Do your own research or invest with a fund that does research into alternative digital assets.

In summary

If you scrolled down to this, just read the whole thing, it's not long. Again, we want to reiterate our point of view that the long term future of Bitcoin and crypto feels healthy and exciting.


Avicenna capital

crypto / fintech / macro research

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