Mixed Signals: Sowing the Seeds of Investing in the Digital Age
Anyone following the Booyah Traders newsletters is sure to have noticed that I have taken a writing hiatus of late. You would have been correct in surmising that the flat market is simultaneously annoying and boring the piss out of me. However, this is not the sole basis for me stepping back and collecting my thoughts. Recently crypto has been acting like that person you met at the bar and totally hit it off with, sharing drunken revelries all night, only to find out on the second date that they are much less tolerable in person. Better yet, the person that expresses their fondness of you behind closed doors but acts like you are mere acquaintances in public. Why are we back in the accumulation phase Bitcoin? I thought we were going to the moon together. I even bought you a ring (that you inadvertently paid for during one of those all time highs earlier this year).
Everyone knows Bitcoin trends in cycles, but in 2021 crypto has had a lot more attention and positive portrayals in the media from Big Money investors such as Jamie Dimon and Goldman Sachs. We know that these two are primary players in the oligarchy, so it's only a matter of time before the SEC rolls out the red carpet for these whales to diversify into crypto. So why has this not happened and when will we be checking the price of crypto every minute again?
The answer to the first part of that question is that this has happened and is currently happening. Whales are purchasing large amounts of Bitcoin during this dip and setting themselves up for future price increases. An example can be seen in the 3rd largest Bitcoin Wallet, which is the largest non-exchange wallet. Its owners have significantly increased their share of Bitcoin during this price decline. This is a common trend among Bitcoin Whales.
Yet while a great number of whales have increased their Bitcoin holdings, the price has gradually declined. This is due to the fact that retail has continued to sell during this dip, convinced that the bear market has arrived. This can be seen in the following chart showing the number of wallet addresses holding bitcoin. Please note that after the price of Bitcoin stabilized, the number of active addresses continued to decline at a steady rate.
The last time there were so few holders was in May 2020, more than one year ago. From this chart, also note that as prices increase, so do the number of active addresses. There is an increased number of retail investors buying in and chasing high prices and when prices plummet, many of these investors sell their assets.
For the second part of the above question, when will Bitcoin's price recover, I would argue that the whales have no incentive to allow prices to increase while there are such a large number of retail investors selling them bitcoin at rock bottom prices. When the orange line in the above graph stabilizes, we should see an upwards price trend, but not before.
During this dip the whales' trading pattern is strikingly simple.
1) Wait or sell a little bitcoin and allow retail investors to sell off more assets at low prices
2) Purchase enough Bitcoin so that it increases your holding from before you sold, but not so much that it signals a large price increase is coming.
3) Repeat this pattern until you and your fellow whales are satisfied that you have enough Bitcoin to enable your oligarch clients to gain immense wealth and retain power entering the digital age.
What do I mean in #3 about the digital age?
During the Renaissance, people knew that art and culture had advanced, but nobody would have thought that this would define an era. Similarly, during the industrial revolution people knew that technology had advanced, but it would have simply been normal progression for someone alive during that time. We are currently at the precipice of the digital age. It has already begun and the oligarchs are working hard to ensure that they don't lose their control over the indentured servants they have working in their factories and stores. Before the common man knew what to accumulate, oligarchs had taken control of precious metals, sources of energy, land and fiat currencies. They are currently doing the same with digital currencies. Only some of us can see it happening, and just like a select few in the past, those prescient enough will be able to break our chains and free ourselves from the corporate slavery that has defined our existence.
From birth we are indoctrinated to believe that our value lies in our jobs and how much money we make (which is somewhat congruous to how much money you make for your employer.) Morally superior and empathetic individuals need not apply to live a "successful" existence. Cryptocurrency is our opportunity to become financially independent and create some good for others around us still stuck in the rat race status quo.
100 years from now, children in history classes will read about how bitcoin was only $35,000 apiece and will marvel at the opportunity their great-great-grandparents blindly passed up in exchange for a new iphone that was engineered to self destruct 1 year after purchase. Do you want those kids to be cursing your name from a dumpster or shouting it from the top of our palace on Booyah Island (one day guys!)?
If you are a cynic of society, love crypto or just want a place to learn and discuss trading, please join our telegram group! We have recently added a second group for those that just want analysis from our senior members and don't want to filter through the legion of reprobates making up our user base.
Happy trading everyone!