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How Do Bitcoin Whales Benefit from Retailers' Fear?
Despite the volatile market in the past month, Bitcoin has shown impressive resilience on the price chart. This is clearly demonstrated by the fact that whenever BTC drops in price, buyers push it back towards the $96,000 level. However, the current state of the US economy is affecting cryptocurrency investors, especially retail traders, leading to the possibility of further volatility. This is because retail traders are very sensitive to news and macroeconomic developments. On the contrary, whales often behave differently and sometimes see discounts as a good opportunity to accumulate more assets. Bitcoin Whales Benefit from Retailers' Fear According to the latest analysis from Santiment, whales and sharks are taking advantage of retail traders' fear of a potential collapse. Retail investors often assume that history will repeat itself by comparing recent news to price performance in similar circumstances in the past. For example, in 2022, the price of BTC dropping by over 50% is attributed to the Federal Reserve (Fed)'s anti-inflation measures and aggressive interest rate hikes. As a result, retail investors naturally fear a repeat of the significant price drop due to recent inflation and the Fed's failure to lower interest rates. The sensitivity of retailers to inflation and interest rate hikes has enabled whales and sharks to easily buy coins without encountering significant barriers from the market.
Whenever the price adjusts on the chart, whales and sharks join the market and buy the dip, while retail investors stay away from the market. For example, in the bear market of 2022, whales and sharks are behaving like current retail investors. Therefore, in 2022, wallets holding more than 10 BTC have reduced their holdings as interest rates rise.
However, in the past 6 months, wallets holding more than 10 BTC have behaved differently. These wallets have grown significantly, despite the unstable economic conditions. Therefore, these holders are not sensitive to US inflation data or Fed interest rate cuts, and they expect the Bitcoin market to develop independently. Does it have any impact on Bitcoin? Bitcoin wallets holding more than 10 BTC are currently holding steady, despite the current economic conditions. This is a sign that large holders are optimistic and expect the market to recover.
This optimistic psychology can be demonstrated by the fact that the capital inflow of whales continuously exceeds the outflow during the week. Specifically, the inflow of funds from large holders reached a high level of 7,600 BTC and remained stable at 4,100 BTC at the current time. Therefore, the net flow of the large holder group has remained positive over the past week, implying that large holders are buying more BTC than selling.
Large holder inflows, including institutions, may be further confirmed by the decreasing ratio of inflows to the exchange. In fact, the capital flow ratio has decreased from 0.16 to 0.11 over the past 18 days. This implies that many coins are being transferred to cold wallets as institutions accumulate stability.
Therefore, if the current psychology of the whale remains unchanged, Bitcoin may recover and reclaim the $99,600 level that it has encountered multiple rejections. Conversely, if retail sellers continue to sell, BTC will continue to trade sideways until there is positive news to restore their confidence. A healthy market structure can be confirmed by the increasing scarcity of Bitcoin. For example, Bitcoin's stock-to-flow ratio surged from 115.1 to 579.43 in the past week. Such strong growth means there are fewer BTC available for sale compared to the amount of coins being transferred to private wallets. Simply put, while retail traders are withdrawing from the market, holders are not. In fact, whales are overactive and predicting an early price recovery. Therefore, they are taking advantage of this opportunity to buy Bitcoin from weaker hands.