Market Analysis

Both small and rich Bitcoin (BTC) traders accumulated the benchmark cryptocurrency en masse during the period its prices rose from below $30,000 to over $40,000, signaling their confidence in the asset’s long-term bullish setup.

The basis of the upside outlook came from Ecoinometrics, a crypto-focused newsletter service. It highlighted in its latest edition a flurry of on-chain data that tracked the flow of Bitcoin into wallets that belonged to the richest of the crypto traders, also known as “whales,” and to entities that held the cryptocurrency in smaller quantities—the so-called “fishes.”

“After a couple of weeks of data showing that most address buckets are accumulating coins, Bitcoin is finally bouncing back from the $30k level,” wrote Nick, the author of Ecoinometrics newsletters as he highlighted a heat map that witnessed Bitcoin flowing into the whales and fishes’ wallets.

The color red pointed to a situation in which every group—whales or fishes—accumulate Bitcoin in past 30 days. Conversely, the color blue corresponded to situations wherein only the smaller “fish” accumulate the digital asset in the same timeframe.

Bitcoin’s heat map returned a red.

“We can do the same plot for the current cycle, and we observe pretty much the same thing,” noted Nick while pointing to the July 2020-July 2021 graph as follows.

Moby Dicks everywhere

Data from other sources matched the Ecoinometrics’ analogy.

For instance, crypto-focused data tracking service WhaleMap reported Thursday that the number of unspent transaction outputs currently belonging to Bitcoin whale wallets has spiked, thereby suggesting their intentions to wait for higher prices.

“The last whale bubble in our range,” tweeted WhaleMap.

“Get above $40,472, and the next resistance is only at around 47k. Whale bubbles for the win.”

Fundamental backdrop

The fundamentals backing the whale involvement in the current Bitcoin rally pointed to fears of a persistently rising inflation, despite the Federal Reserve Chairman Jerome Powell’s attempts to sideline the issue in his recent press conference on Wednesday.

Powell admitted that the inflation has surpassed Fed’s projections in 2021, but blamed it on the unusual nature of the United States’ economic recovery. He noted that supply bottlenecks have created shortages that has led to “temporary” price increases.

The comments appeared as the Fed continued its expansionary policy of near-zero interest rates and $120 billiona month in bond purchases that, as the Wall Street Journal editorial noted, could have been stopped two months after its launch in March 2020.

The journal cited the National Bureau of Economic Research’s report of last week, which noted that the U.S. recession officially ended in April 2020. 

“The FED has a real challenge ahead balancing its response to a global pandemic with low rates and seemingly rising inflation,” Jeffery Wang, Head of Americas at Amber Group, told Cointelegraph, calling it “an extremely difficult situation” for central banks running their quantitative easing programs hot.

Wang added that the backdrop of cheap money and rising inflation creates a bullish backdrop for flight-to-safety assets like equities, real estate, and Bitcoin. He said:

“From here, I think crypto and BTC will still be considered an asset that, while highly volatile can be a hedge against inflation and should do well in this environment.”

Pankaj Balani, the chief executive of the crypto derivatives platform Delta Exchange, meanwhile anticipated Bitcoin to continue its bull run towards $50,000, citing options activity that he said remains heavily skewed to the upside at least until mid-August.

Related: Bitcoin traders express mixed emotions about what’s next for BTC price

“There is call buying activity across maturities – weekly, bi-weekly and monthly,” Balani told Cointelegraph in an email statement.

“Fifty thousand (50K) strike for August expiry is highlighted here and has the highest OI. Once again there is not much OI between 45,000 and 50,000 strikes (for the Aug expiry) and we can see sharp moves here.”

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