The recent volatility in the cryptocurrency market has had Bitcoin (BTC) at the heart of it all. In a saga that seemingly never gets old, Bitcoin whales — large holders of BTC — have taken advantage of the recent price drops to accumulate even more coins.
This time, however, it seems that the retail traders who typically comprise the “dumb money” end of the BTC trading spectrum are not being allowed to buy back in at lower prices. Instead, sharp volatility is now simply leading to increased selling and liquidation of positions by these retail traders.
As we move through February, the data paints a clear picture of a transitioning market. Recent statistics show that the count of Bitcoin wallets holding 100 or more BTC has gone up by 135, demonstrating that large market players are still in accumulation mode when it comes to Bitcoin. This increase in whale activity, however, is at odds with a concerning trend among smaller investors. The number of wallets holding less than 100 BTC has plummeted by an eye-popping 138,680, suggesting that a pretty large contingent of smaller traders is either throwing in the towel or scaling way back on what have become very uncertain Bitcoin bets.
🐳 In a tale as old as time, Bitcoin whales are stacking up more coins during crypto's mid-sized drop and major volatile conditions.
🐟 For small retail traders, especially the ones who first entered the markets in the past 6 months, the volatility is causing them to liquidate.… pic.twitter.com/IT1ONrF6Ia
— Santiment (@santimentfeed) February 6, 2025
Bitcoin’s Volatility Profile: Changing for the Better?
Historically, Bitcoin has been a wildly fluctuating asset, known for rapid price swings that often resulted in dramatic bull and bear markets. However, the current market profile of Bitcoin is displaying, at least a bit, of what you might call “stability.” The Realized Volatility of Bitcoin, calculated over a three-month rolling window, has reduced significantly in recent times.
During past bull runs, this metric typically has remained above 80%, and often above 100%. However, during this cycle, it has hovered below 50%, marking a significant departure from previous trends. This shift could signal that Bitcoin’s volatility profile is evolving as the asset matures. Lower volatility, or more stable Bitcoin pricing, certainly bodes well for the long-term health of our favorite digital asset.
Although the market shows seemingly erratic conditions, the long-term prospects for Bitcoin look brighter than ever. February has brought movement that is both eye-catching and promising, chiefly in the area of inflows. On February 5, for instance, a total of $66.4 million in net inflows was recorded for Bitcoin’s spot ETF. This, of course, is not just the retail segment of the market making its presence felt; rather, it’s a considerable chunk of institutional cash that has seemingly made its way back into the Bitcoin space. Spot ETFs are often viewed as a more traditional vehicle for institutional investors to gain exposure to Bitcoin, and the fact that prospects for such a vehicle have seemingly re-entered the conversation is a positive sign.
Nevertheless, one should not overlook sell-side pressure. Just yesterday, an astonishing $2.73 billion worth of profits from Bitcoin were realized, and this contributed to intensified selling. When large amounts of Bitcoin are sold, the price can dip, which makes it tough for smaller traders. And even with price stability, “larger investors might still be taking profits,” which is most likely prompting many smaller traders to liquidate, especially in light of the talk around potential further declines.
On February 5, the Bitcoin spot ETF had a total net inflow of $66.3761 million. The Ethereum spot ETF had a total net inflow of $18.1052 million, with net inflows continuing for 5 consecutive days. https://t.co/Tvs2oCSxTg
— Wu Blockchain (@WuBlockchain) February 6, 2025
Even with this selling pressure, the situation is overall quite positive. More and more, the large investors in the market—what we call “whales”—are showing signs of having returned to us. These whales are back, and they’re not back for just any old reason. They’re back because, at these price levels, with Bitcoin priced around $30,000, they believe it’s an accumulation opportunity. They have a growing confidence that this setup is right for the price to move up. And they have another reason for being back: With the limited supply of Bitcoin, these whales have every reason to be bullish on the price moving up in October, November, or some other time frame, given that demand seems virtually certain to be moving up in tandem.
The rife volatility of the market is a big risk for small traders. Those who have recently entered the market may well find themselves in a tough spot when the prices start swinging and don’t seem to have any particular direction. The swings can be hard to take when you don’t have the experience to trust that things will turn out OK in the end. But seasoned traders know that these are really just opportunities in disguise. They know that they can use the sale prices that these moments provide to add to their hoard of coins.
To sum up, although Bitcoin’s market is undergoing its typical volatile swings, the data indicate that it is in a transformative stage. Increasing whale accumulation and the burgeoning role of institutional investors suggest we’re setting up for a possible market recovery. Still, then, what’s a small fish to do? The most crucial part of making an investment decision is assessing your risk. Given our current context, with the market having just experienced a downturn and seeming on the verge of possibly doing so again, this is an especially important step to ensure you’re not in a situation that might feel more bullish than it actually is.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.
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