Bitcoin Whales are Reducing Their Holdings – Why?

There are three key elements to becoming an investor in cryptocurrency. Strategy, context and patience. Since its inception over a decade ago, volatility has been implicit within the nature of blockchain. This has been most clearly exemplified over the last year. In November 2021, Bitcoin reached its highest value of $65,000. Nearly a year later, it dropped by just over $40,000.

This is mainly due to the external and internal pressures back in June 2022, causing an earthquake in the market, which affected every token and caused them to fall. This then introduced the second crypto winter, which, if the last winter was anything to go by, could last for another two years. 

Following The Whales

In 2022, specifically, patience was proven to be of ultimate value. While many investors were driven away by the fall in value, a number of others chose to button up and fight through the impending winter, no matter how bleak the outset. 

In most cases, whales are a good example of how big-time investors should react to situations like these. Take Michael Saylor, for instance. As of September 2022, his company MicroStrategy owns 130,000 BTC (0.62% of all mined Bitcoin), and he has personally stated that there will not be a price low enough to be forced into selling. Instead, Saylor has revealed his confidence in Bitcoin as a token and the incoming metaverse as an incentive to hold and wait for prices to surge. 

There are investors who have taken confidence in Saylor’s stance. Hodling has long been pinpointed as an effective financial management tactic, especially during bear markets, when selling off assets would likely lead to a loss. With Web3 projected to launch around 2030, experts still predict cryptocurrency as having a definitive role in the world’s future, with the price of Bitcoin specifically potentially rising to $200,000 in the next decade.

Crypto Whales Make An Unexpected Turn

With this being said, however, many whales have recently made an unexpected manoeuvre, quite unlike Saylor’s. According to on-chain analytics, the amount of BTC which is held by whales has been on a steady decline for nearly a whole year. Users holding anything between 100 to 10,000 BTC have lowered their percentage to around 45.72%, which is a 29-month low. 

Although there will be many reasons why this is the case, one of the most evident is the external pressures faced by whales in the real world. Despite cryptocurrencies like Bitcoin or Ethereum not being traditional currencies, the belief that the price of Ethereum or Bitcoin cannot be affected by a recession in the same way that fiat currency can is simply incorrect. 

Cryptocurrencies are not recession-proof. Their volatility is marked by both the internal market and external context. This is exemplified by the significant drop in the market in February, which was the first month of the Ukrainian war. Just as the traditional stock market is affected by global implications, so too is the cryptocurrency market. 

The Crypto Market Is Feeling The Squeeze

It is not a coincidence, then, that crypto whales have been letting go of their BTC holdings over 2022. In the fallout of the last two years, the world has steadily been creeping into a recession, with inflation hitting new highs across Europe (Germany recently confirmed its first double digits since the Euro era), with the US also documenting two consecutive quarters of negative GDP. 

Because of this, investor confidence is being put to the test. Not only is cryptocurrency going through its second winter (with no indication of when it will end), but there have been alarm bells ringing for months about a global recession taking hold by 2023. For many whales, the patience factor of BTC holding is overrun by the financial panic, which is beginning to take a firm grip. In the fear of losing more, they have instead decided to either sell off BTC entirely or convert to stablecoins which offer more solidity. At times like these, it is hard to blame them. 

Just as investors follow the moves of Michael Saylor, we can expect to see other small-time investors similarly following this trend. That’s not to say there is a right or wrong reaction to the current situation, either. Hodling BTC with the current projection of new-time highs could very well lead to solid returns, whilst clearing through a portfolio and selling before a global recession hits is a good way to replace patience with assurance. After all, there will always be ample opportunity to rebuild and attain a solid portfolio when things start looking up. It simply comes down to a choice. Keep true to those three key elements of investment, or react quickly to the wider, global financial situation. Right now, either could turn out to be effective.