25.10.2021

How large investors “knock” cryptocurrency out of inexperienced traders

According to the OKEx trading platform, it is large investors and institutions that receive the most profits from the cryptocurrency market, while ordinary crypto enthusiasts “do not keep up” for the rally in Bitcoin and other coins.

In other words, “market sharks” buy assets on the lows and successfully merge them after their price rises, but all the others act exactly the opposite.

How not to trade cryptocurrencies

Trading between August and November 2020 showed that during the November BTC rally, high-net worth individual investors and institutions successfully made their profits by selling coins. In the same month, small traders continued to buy the asset. That is, bitcoins simply passed from the hands of “smart money” into the hands of everyone else.

Categories of investors by wallet size and their tactics in different bull run periods

It is noteworthy that in late November, when the price of Bitcoin was approaching its new all-time high, whales and financial institutions bought the main digital asset for Thanksgiving – just during its serious collapse. But novice traders were frightened by the Bitcoin dump, so they started selling it on a local day, reports CoinDesk.

Here it seems like an absurd situation turns out, because why would an investor sell an asset at its local day? However, experience shows that this is exactly what happens in trading because of emotions: in such cases, the owners of cryptocurrencies are simply afraid of losing more funds in dollar terms. Therefore, they dump coins, while fixing a loss at the same time. Well, these assets are bought by large players who can afford to invest while others panic.

Behavior of different categories of investors in November

Another characteristic of market participants from CryptoQuant analysts indicates a very accurate time of buying coins by large investors. As you can see from the chart below, whales bought out bitcoins on almost every local day before and during the active growth of the cryptocurrency price.

The graph shows the time interval in which the institutions began to actively buy up the crypt.

In addition, in 2020, a new type of large players like MicroStrategy or MassMutual has appeared in the cryptoindustry. Previously, these companies were only involved in the traditional financial sector. At the same time, they are unlikely to collapse the Bitcoin chart with a huge sale of coins at one point. On the contrary: MicroStrategy, for example, is only increasing its positions in the cryptocurrency and plans not to sell them for at least a hundred years.

An excellent example is the purchase of a cryptocurrency at the very beginning of its growth.

Institutional money has been one of the reasons for BTC’s rise this year, but not the only one. It should be noted that very often crypto enthusiasts exaggerate the degree of influence of large OTC transactions on the market price of Bitcoin, and it is in such transactions that institutions will buy or sell coins. Over time, MicroStrategy and similar companies will become major players in the crypto space. If before that even a wealthy investor who bought bitcoins early could be considered a whale, now, against the background of the giants of the financial world, he will turn into a small fish.

We believe that such changes for the cryptocurrency market look very interesting. Over the past few years, blockchain asset fans have regularly predicted institutional entry into the niche – and now it has happened. As a result, the same bitcoins began to be bought in tens of thousands, which affected the growth of the rate. Well, the higher the cost, the more difficult it is for an ordinary investor to take possession of, for example, a whole bitcoin.

We also recommend traders to draw conclusions from the given data and exclude emotions when conducting trading operations. Judging by what is happening, they are the ones who make you make mistakes and lose money.

Conclusion – soon as many bitcoins as possible will be in the hands of regulars from Wall Street.

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