Chainalysis: Bitcoin whales used market downturn to bolster positions

Large investors used last week’s plunge in bitcoin prices to increase their positions. The whales bought 77,000 BTC, according to analytics firm Chainalysis.

Read the full Report at https://t.co/ci1lk8a9ib

— Philip Gradwell (@philip_gradwell) May 27, 2021

On May 19, the first cryptocurrency fell below the support level around $40,000, dragging the rest of the market lower. At one point, the price of digital gold touched $30,000, but then recovered to above $36,000.

According to Chainalysis senior economist Philip Gradwell, during this period 75% of transfers went to crypto exchanges from other trading venues. This points to activity by market makers and arbitrage traders. Miners accounted for only 1% of inflows.

The market drop led to 1.2 million BTC entering exchanges with losses of 5% to 25% compared with the price at the moment they were credited to holders’ wallets. Investors also sold 120,000 BTC at losses of 25% or more.

Gradwell stressed that the total number of loss-making bitcoin sales was lower than at the end of 2017 or in mid-March 2020.

In the Ethereum network, by contrast, the number of loss-making transactions reached a record high. Holders sold 22.6 million ETH at losses of 5% to 25%.

In dollar terms, investors lost at least $3.2 billion on Bitcoin. Gradwell noted that for Ethereum the figure is smaller, but the overall picture is similar.

Analysts found that the average cost basis for bitcoin for investors who entered the market in the last year was $37,800. During the week, Bitcoin’s price hovered around this level, finally moving above it toward the end of the week.

According to Gradwell, if the price had settled below the average cost basis, one could conclude that Bitcoin holders doubted the asset’s fair value.

For Ethereum, the average purchase cost was $1,700.

Earlier, Morgan Creek Digital co-founder Anthony Pompliano concluded that during the market slump Bitcoin addresses with balances between 10,000 and 100,000 BTC increased their positions by 122,588 BTC.

MicroStrategy CFO Fung Le described the investment in digital gold as ‘the obligation of technology companies’.