Traders are shifting funds into select altcoins as Bitcoin price trades in a sideways range.
The top 100 richest Bitcoin (BTC) addresses have added 334,000 Bitcoin to their existing holdings over the past 30 days, a clear signal that whales and institutional-size investors bought the dip. A positive sign is that most of them have not reacted to the recent fall in Bitcoin’s price. This suggests that large investors are bullish on Bitcoin for the long term rather than looking to make a quick gain.
An important element in the recent rally is many of the purchases have come from institutional investors who were critical of Bitcoin in the past. The list is likely to get bigger as Oaktree Capital’s co-chairman and co-founder Howard Marks is revisiting his previous “skeptical view” on Bitcoin. In his latest investor memo, Marks said that “thankfully,” his son had purchased a meaningful amount of Bitcoin for the family.
Several institutional investors have been critical of the central banks’ expansionary monetary policies but until now, they primarily used gold to hedge their portfolios. The ones who shifted even a small portion of their gold portfolio into Bitcoin are reaping huge gains.
One such firm, Ruffer Investment had redeployed 2.5% of its Multi-Strategies Fund from gold to Bitcoin in November, and since then, gold has returned a meager 4%, and Bitcoin, even after the recent fall is still up by about 92%.
These outsized gains, even on a small percentage of the portfolio, can easily outperform the peers. To keep up with the competition, institutional investors who may have missed buying earlier could quietly open Bitcoin positions on each new correction.
Many analysts have suggested that institutional investor inflow propelled the current Bitcoin rally and for this reason, traders will be looking out for signals that large investors are buying again.
Let’s analyze the charts of the top-10 cryptocurrencies to find out.
The long tail on the Jan. 11 candlestick shows the bulls aggressively purchased the dip below the 20-day exponential moving average ($32,705). However, the failure of the bulls to resume the uptrend on Jan. 12 shows the bears continue to sell on every minor rally.
The bears want to break and sustain the price below the 20-day EMA while the bulls are attempting to defend it. If the BTC/USD pair does not rebound sharply within the next few days, it may lead to capitulation from buyers and the short-term traders stuck at higher levels.
If the selling intensifies, the BTC/USD pair may break below the 38.2% Fibonacci retracement level at $29,688.10 and fall to the 50-day simple moving average ($24,983). Such a move will suggest the bullish momentum has weakened and that may lead to a few days of range-bound action.
On the other hand, if the pair rebounds off the current levels, the bulls will try to resume the uptrend. The momentum could pick up if the bulls drive the price above $41.959.63.
The bulls aggressively purchased Ether (ETH) during the dip below the 20-day EMA ($982) on Jan. 11 but they could not sustain the recovery on Jan. 12, suggesting that demand dries up at higher levels.
However, the positive sign is that the bulls again bought the dip to the 20-day EMA today. The buyers will now try to push the price above $1,150 and if they succeed, the ETH/USD pair may rise to $1,300. A breakout of this resistance may resume the uptrend.
On the contrary, if the pair turns down and breaks below the 20-day EMA, the decline could extend to $840.93 and then to the 50-day SMA ($732). A break below this support will signal that the bears are back in the game.