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The Bithumb Blog

[Bithumb Easyconomy] Experienced investers see this bear market as an opportunity

“This year’s May was the most brutal month for Bitcoin.” This is what CNN said of the recent digital assets market that plummeted. Currently, Bitcoin is being traded at around 36,000 dollars based on coin market cap. This is almost half the record high of 64,000 dollars set in the previous month. This month, the value sunk by over 30%, the largest drop (monthly) in the last decade.

Gold is better than Bitcoin? Millennials prefer Bitcoin

One asset has benefited from the recent stagnation of digital assets. It is “gold.” On the last 20th, gold futures for August delivery set a record high in five months at 1883.90 dollars per troy ounce, according to New York Mercantile Exchange. The value jumped by over 7%, in a totally opposite trend than Bitcoin’s. In addition to the digital asset’s stagnation, another reason for the surge in gold price is deemed to be the increased demand for safe assets due to worries over inflation. In fact, the stock market also recently performed poorly with highly volatile growth stocks taking a steeper dive than value stocks for quite a while.

Nonetheless, some are saying that prolonged inflation will in the end bring down the gold price. Although gold is a safe asset, its purchase demand will eventually decline because it does not give any interest profit. In addition, the rising popularity of Bitcoin as the “digital gold” among Millennials can also contribute to fall of the gold price in the long run.

Volatility is a risk? Experienced investors bought more

Is price volatility of a digital asset really a risk? Investors with different investment patterns are showing totally different behaviors. According to the on-chain monitoring platform Glassnode, short-term holders are selling their digital assets while miners and long-term holders are purchasing more. Glassnode said, “In the recent bearish market, investors who hold Bitcoin for 1~3 years tended to keep them without selling and the number of whales holding over 10,000 BTC has actually increased.” It added that the “losing buyers are new investors who have bought Bitcoins within the recent 3~4 months.”

This says that short-term holders are seeing this bear market as a threat while long-term holders and whales see it as an opportunity instead. In fact, this phenomenon serves to reinforce the fundamental strength of the digital assets. As the number of long-term holders increase and the whales continue to hold on to their assets without selling, volatility will only result in temporary events and the price will most likely slope upwards.

What we have learned from the COVID-19 meltdown in March last year

Quite many domestic investors chose long-term holding over loss cut during this plummeting market. On the backdrop of their boldness was the Black Thursday that had engulfed the entire worlds’ stock markets in March last year. Back then, many investors dumped their assets into the market out of panic, which caused the stock and digital asset prices to nosedive. However, the market recovered at an unbelievably fast pace, and the digital asset prices steeply rose, setting record highs.

To the investors who learned something from this, a bear market is no longer a threat. In fact, the kimchi premium jumped by over 25% amid the recent market panic. This can mean that, while foreign investors were dumping their assets out of fear, domestic investors were actively buying them.

However, going only after short-term profits may not be a good idea if you want to stay in the game. How the long-term investors and whales could survive in the meltdown has to do with the very nature of digital assets. If you have a firm belief in the digital asset’s value rise, a risk can turn into an opportunity in a moment.

*This research and analysis material was produced for the purpose of providing reference information based on reliable data and information. However, its accuracy or quality is not guaranteed.

*This material reflects personal opinions which may not be consistent with the company’s official views.

*This material has never been provided to third parties such as institutional investors



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