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Bitcoin Whales are Buying Heavily at Every Dip, Is US$83,000 on the Cards after Heavy Correction?

Bitcoin price against the US Dollar (BTC/USD) has breached below the crucial US$40,000 psychological support level and is continuing its downward correction. On the Bitcoin derivative market, the whales bought at the dip. The Bitcoin futures premium (indicating the willingness of traders to obtain upside exposure in BTC futures) is at the lowest level in the last 6-months.

Interestingly, this indicator matches with that of the situations persisting on December 11, 2020. Back on December 11, 2020, the price of each BTC hit a low at US$17,600, just 10-days after hitting an all-time-high (ATH) at US$19,915. The action of derivatives in December 2020 triggered a 95% rally within a time span of just 23-days. This rally took the BTC price to a new high at US$42,000.

There is another similarity between the current situation and the one prevailing around December 2020-January 2021. Not only the futures premium bottom in both instances but the downturn was also accelerated by the rumors of potentially harmful United States regulation.

The futures premium jumped above 15% after the spot price of Bitcoin against the US Dollar reached the then ATH at US$19,915. The 8% low looks average, especially if we compare it with the previous month’s average. However, this is very modest especially after the Bitcoin price rallied 90% in a span of just 2-months. After hitting the ATH at US$19,915, the price corrected to US$17,600. As this level proved its strength, the futures premium of BTC again increased to 15%, which indicates optimism.

Now, coming back to the present situation. It started differently. From the beginning, the BTC market was excessively optimistic. Over the last few weeks, the prevailing situation changed significantly. The price of Bitcoin dropped by around 26%, causing the futures premium to reach 8%, which is the lowest level in the last 6-months.

Regulatory Uncertainties in the US are Back

The US Treasury Secretary Janet Yellen has said on May 4, 2021, at the Washington Square Journal CEO Council Summit that:

“There are issues around money laundering, Bank Secrecy Act, use of digital currencies for illicit payments, consumer protection and the like.”

This was followed by US Securities and Exchange Commission chairperson Gary Gensler’s statement telling the US Congress about the idea to provide more regulatory oversight to the cryptocurrency space. Gensler said:

“Right now, there’s not a market regulator around these crypto exchanges, and thus there’s really no protection against fraud or manipulation.”

The US Securities and Exchange Commission (SEC) issued a statement on May 11, 2021, that warned investors about the risks of the mutual funds that have exposure to Bitcoin futures.

Bitcoin Whales Aggressively Purchased BTC below the US$43,000 Level

The Bitcoin whales bought at the dip, especially after the price dropped below the US$45,000 level. As the US$43,000 support level was tested, the leading crypto traders on the OKEx exchange moved from a 1.62 long-to-short ratio on May 16, 2021, to a 2.74 peak in the early hours of May 17, 2021. This data is very significant. It shows that the whales including the market makers had almost 3-times larger long positions than shorts. This phenomenon is extremely uncommon.

MicroStrategy, the leading most corporate entity with the largest numbers of Bitcoin coins in their balance sheet, bought another US$10 million worth of Bitcoin at an average price of US$43,663.

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