Whales Quietly Accumulate BTC

The [stock] market is a device for transferring money from the impatient to the patient.
Warren Buffett

Large investors are taking the opportunity of lower prices to increase their BTC holdings. This is generally taken to be a bullish sign. In this article, we'll dive into a little market psychology which explains why that might be the case.

How Do Markets Work?

"The market" is simply the sum total of all the buying and selling activity that takes place for an asset. The price of an asset—in this case, bitcoin—is the level where supply meets demand. Every trade requires a buyer and a seller, and "market price" is the latest point at which this has occurred.

There are lots of factors that are said to influence price. There are "fundamentals" like the total number of users who own and use BTC. There is news (for example, recent regulatory news and enforcement or industry updates) which might indicate a more or less favorable outlook for digital assets in the future.

But overall, and to simplify the picture, markets are driven by emotion. When traders are feeling optimistic about an asset, they buy it. When they are fearful, they sell. In many cases, these emotions have little to do with the market's underlying "fundamentals", but result from price action itself. For example, when the price is falling, more traders are fearful of losing money and are more likely to sell, until the price is low enough to tempt in more traders who feel optimistic about the potential for gains.

Whales Vs Retail

Market participants are often characterized in terms of "smart" and "dumb" money.

"Smart money" or "big money" refers to wealthy traders, often institutions. Smart money may have better information than the rest of the market, perhaps due to in-house research they have done, and lengthy experience. They have better training and discipline, and better risk management. They are less likely to be influenced by the natural ups and downs of the market, and will not make trades based on emotion (fear/greed). They remain wealthy because they are smart, and have the funds to survive any periods where the market turns against them; they are less likely to be forced to sell at a loss.

Retail money (or "dumb money") on the other hand, refers to the bulk of market participants who do not have special training or information. They are less patient and more driven by emotion. Without the deep pockets that characterize smart money, they may be forced to sell at times they would prefer not to.

It's not impossible for smaller retail traders to profit from the markets, but it's far easier for big money to benefit. Smart money is well positioned to take the long view, and when times are tough for retail traders, the big players will position for the future.

A recent Santiment post suggests that this time is no different.

🐳 As #altcoin madness has ensued, there quietly is a #bullish divergence between #Bitcoin's accumulating whales and falling price. With whale holdings moving up by ~1K $BTC per day while prices fall, there is reason to believe a strong rebound can occur. https://t.co/Ol0cK5VhPE pic.twitter.com/FeHPqqJx7o

— Santiment (@santimentfeed) June 11, 2023

"Whales" are holders who own 100-10,000 BTC, or $2.5-250 million. This is the smart money of the crypto world. These investors tend to sell at cycle tops, and buy nearer the bottom.

It should come as no surprise that there's always interest around what these whales are doing. They are good at making money, and their wallets often indicate where the market could be heading next. At the moment, they appear to be buying the fear that the SEC's recent actions has prompted, believing this is just a temporary setback.

However, it's worth sounding a note of caution. Whales aren't 100% right all of the time. The market crash last year saw a number of whales (like the Luna Ecosystem Foundation and 3AC) get wiped out. They also work to their own agendas and time frames, and have their own trading strategies. Simply copying their moves is not a sure-fire way to profit.

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