The US government and financial regulators have been doing a lot lately to make life difficult for cryptocurrency enthusiasts. President Joe Biden’s administration is actively supporting a new infrastructure bill that will impose tougher taxation on digital asset owners.
All this can temporarily scare away ordinary investors, but not large players. This is the conclusion reached by experts from the analytical firm Glassnode. Let’s talk about their analysis in more detail.
Let’s start with an explanation: lately, cryptocurrency fans from the United States have had a serious reason to worry. The fact is that in the new infrastructural plan of the state, it was supposed to expand the requirements for tax reporting for companies that act as «brokers» in the world of cryptocurrencies.
In fact, this should affect cryptocurrency exchanges and other payment platforms that carry out transactions for the sale of cryptocurrency. However, the concepts in the document traditionally looked vague, which is why, in fact, cryptocurrency miners, network validators and even software developers can be counted among «brokers».
That is, as a result, legislators may again become a problem for fans of digital assets and force them to leave the United States for the sake of clearer regulation. However, the incomprehensible prospects of interaction with cryptocurrencies in the States do not affect the activity of investors in any way – they continue to invest in coins, and actively.
Who Buys Bitcoin?
It is the «whales» – as it is customary to call large investors in the cryptocurrency niche – that have caused the rapid rise in the price of Bitcoin by more than 20 percent over the past couple of weeks. According to analysts, the volume of transactions on the Bitcoin network worth at least a million dollars has grown by 10 percent since the beginning of August . Now it accounts for almost 70 percent of the total cost of translations.
Glassnode notes that this metric is the best indicator of the noticeable presence of large players in the market. The chart posted on Coindesk clearly shows how transaction volumes have surged between $ 1 million and $ 10 million and over $ 10 million amid the latest price bounce.
From this we can conclude that professional investors are seriously interested in digital assets in the current environment. And it sounds logical: nevertheless, even despite today’s growth of BTC above the 46 thousand dollars mark, the cryptocurrency still lags behind its historical maximum by almost 30 percent. And this creates space for growth in a fairly tight timeframe, which are practically not found among the classic investment tools.
But the share of relatively small transfers decreased as a percentage of the total volume – that is, transactions worth less than a million dollars now occupy 30-40 percent of their total number. Back in July 2020, this figure reached 70 percent . That is, the activity of small traders and investors has really dropped recently.
Accordingly, non-professional investors are still afraid to get involved in the cryptocurrency niche after a series of sharp market crashes in May and June 2021. This usually happens: first, assets are bought at lower prices by professionals who have a large amount of free capital. As the rate of the asset grows, they gradually get rid of the cryptocurrency – it just goes to the wallets of newcomers. As a result, the latter have a chance to lose money amid an unexpected market downturn, while professionals play more cautiously and are content with lower profits in percentage terms.
Finally, another important indicator is the local growth in the number of coins that have not moved from cryptocurrency wallets for a long time. In the chart below, you can see how this metric declined during a bullish trend due to the gradual selling of bitcoins against the backdrop of an increase in their price. Now market players have returned to the accumulation of BTC, preparing for a new round of cryptocurrency price increases.
Growth in the number of coins held on crypto wallets for a long time
Conclusion : the presence of large investors on the crypto market is now undeniable. Most importantly, they have the necessary tool for the continued growth of the BTC price in the form of large free capital. It is he who will help push the cost of the cryptocurrency to new all-time highs in the coming months. At the same time, inexperienced investors most likely did not have time to fix a profit in stablecoins at the previous stage of growth, so now they areforced to wait for an increase in the price of an asset so as not to sell it in the red. This explains the fact that initially large volumes of cryptocurrencies are bought at a discount by professionals.
We believe that analysts’ data unambiguously speaks of the continued growth of the cryptocurrency market for the foreseeable future. Hopefully, the scale of the latter will be even greater than what we have already seen in 2021.
