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Bitcoin whales buy low, sell high. What is the story behind it?

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According to the latest data released from leading exchange OKEx possibly indicates in what ways the holders of amounts of Bitcoin or “whales” influence the Bitcoins price in the all increasing scenario of Bitcoins rally in November.

During that particular period when Bitcoin run up the Institutions and whales started to buy dips and sell them when the price went up. This practice directed a large number of retail investors scrambling to chase the rising price. We find this information in a newly released  OKEx data report. 

When we observe deeply the trading data of Bitcoin/tether pair that appear on the exchange OKEx especially between August and November, we see that during November Bitcoins rally the big whales like individual investors holding a big amount of coins, and some institutions started to take profits by selling their Bitcoin.

At the same time, the smaller individual investors with sizeable holdings such as retail investors remain busy buying as they did in September and October ignoring the higher prices in the older cryptocurrency. This is extracted from the data compiled by OKEx and blockchain data firm Kaiko. To know more about Bitcoin visit Bitcoin prime.

The trading activity of Bitcoin Whales Vs Small Investors

Observing the data available on OKEx, one thing was specifically noted that during the end of November when Bitcoins price was reaching its new all-time high value the day-to-day activity of the trading platforms shows that whales and institutions actively purchased the Thanksgiving price dip. At the same time, the investors and other small traders hastily sold off their Bitcoins during that short period of the market crash on November 26.

It is also interesting to note that the data  from this report show the holders of large amounts of Bitcoin are most interested in the business of buying low and selling high. They are least interested to buy  Bitcoins at their peak value  time as we see in the panic behavior of retail investors.

This report also shows that the whales are the real catalysts to drive the market, indulge retail traders in a frenzy, and capitalize on opportunities to buy relatively cheap coins. Retail traders and everyone else in between,  have two choices before them either to swim with the tide or against it.

A different take

The data from another popular crypto analysis firm, CryptoQuant, indicate somewhat different findings. It says that throughout 2020 Bitcoin whales possibly never missed out on any “buy the dip” opportunity.

This report also says that the large-sized traders have played an important role to save bitcoin’s price from crashing further. Rather they were chief activists to drive each price rally, potentially making profits by selling Bitcoin at higher prices.

New institutions turning whales into small fish

Mainly two types of institutions became prominent in the crypto space in 2020. They can be divided into two groups. One includes crypto natives like crypto quant firms and family offices. And the second is comprised of traditional financial markets such as Microstrategy and MassMutual.

According to a verdict from analysts who spoke with CoinDesk, the second group has always been the main driving force to cause each price dip by intentionally selling their bitcoin. This step eventually directs a market crash. John Todaro in an in an email response to CoinDesk expressed his views. According to him most of the dominant institutions have not yet aired their selling positions. He mentioned Microstrategy and Grayscale. Both companies have not been visibly involved in buying Bitcoins.

He further explains his point by adding that although institutional money could be the main character working in the background for this year’s rallies,  yet it does not explain recent price gains. This is so as most of the time the institutions use the option of over-the-counter firms to trade bitcoin. And these are particularly designed to have a minimal price impact on the market.

The Trading Trend on OTC

The trend of two-way markets is triggered by Over-the-counter (OTC) desks. It is becoming common as we see that every day more and more counterparties are stepping in which is increasing the opportunity to match buyers and sellers more directly to have less impact on markets.

Todaro also says that although it is right that smaller institutions or whales are less dependent on OTC desks and prefer to use exchanges to place big market orders that result in a more immediate impact on price. So with the increased entry of large institutions in the Bitcoin market, the impact of small institutions and whales is relatively decreasing in the market.

Matthew Hougan, a chief investment officer of Bitwise Asset Management says that it is predictable that traditional institutions would not be able to cast much of their influence on the market as they only buy Bitcoin Considering it to be digital gold. So it is improbable that these traditional institutions would be a reason for market crashes.

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