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Whales and Hodlers: How Holding on to BTC Could See You Through a Crypto Winter

Key Insights:

  • The extended crypto winter has led to the destabilization of stablecoins, defaults, bankruptcies, and opportunities.

  • Current bitcoin (BTC) price levels are considered attractive to those looking at a longer investment horizon.

  • Corporations and countries are joining the bitcoin bandwagon, with an upward trend in bitcoin hodlers supporting lofty price projections.

Bitcoin (BTC) trading is not for the fainthearted, with cryptos synonymous with big swings and heightened volatility.

Since the explosion of the crypto market and the meteoric rise of bitcoin and altcoins to 2022 all-time highs, numerous trading strategies have attempted to tackle two unknowns…

The big question is at what price bitcoin will top out and by when. Particularly bullish forecasts have projected bitcoin to reach as high as $1 million.

In June, FX Empire explored the bitcoin price trajectory to 2025. The FX Empire report pointed out a series of projections. Most notable was a 2025 projection of $179,280.

Vol Trading Versus Buy and Hold Strategies – The Pros and Cons

An investment strategy common amongst investors is to buy-and-hold. Simply put, buy-and-hold is a strategy where investors remain invested with a long-term investment horizon. Investors will ignore market uncertainties, economic shocks, and other factors influencing movement across asset classes.

Here, investors place a trade with the expectation of an upward trend over time.

Taking bitcoin as an example, an investor buying bitcoin in 2017 would have been tempted to sell out at the Dec-2017 high of $19,871. Others may have been tempted to cash out in Dec-2020, at a high of $29,302.

BTCUSD Monthly Chart 090722
BTCUSD Monthly Chart 090722

More determined investors with a strong belief that bitcoin can reach the dizzying heights of $200,000 would have held on through the Nov-2021 all-time high of $68,979.

In the early days of bitcoin, there were numerous stories of bitcoin investors doubling their money. A buy-and-hold at a Jan-2017 low of $740 to the current value of $21,593 delivers a 2,800 percent return.

In contrast to jumpy investors who could have shipped out at any one of the price spikes, hodlers are in it for the long haul. The market refers to some of these investors as Bitcoin Whales.

By contrast, bitcoin day trading or high-frequency trading plays off market volatility. The frequency of trading can range from algo-driven intra-minute trading to intraday trading that could involve 20-30 trades a day.

While traders can make sizeable returns, sharp movements could wipe out entire asset pools.

Identifying entry and exit points are the key. Traders not only need to carry out technical analysis but constantly monitor the crypto news wires.

A 24-7 market also means there is no option to leave positions open overnight without the risk of a sizeable loss.

Choosing an Investment Strategy Requires Conviction

Both strategies have their pros and cons. For traders who don’t buy into the unthinkable bitcoin projections, volatility trading would be the way forward.

However, for those convinced of a continued upward trend and can stomach the peaks and troughs of the crypto market, the buy-and-hold strategy may be a better fit. Here, investors can buy more on the dips, as Bitcoin Whales have done during this crypto winter and at other periods of price decline.

The support of Bitcoin Whales contributes to the theory that the upward trend will continue.

Bitcoin – Hodlers Include Listed Companies and Countries

Recently, we have seen a marked shift in the bitcoin investor base. Bitcoin is no longer an investment hail Mary but an asset class considered worthy of holding.

Several prominent blue-chip companies hold bitcoin on their balance sheets despite significant price volatility.

Prominent companies holding bitcoin include MicroStrategy Inc (MSTR), Tesla (TSLA), and Block Inc (SQ).

According to a NASDAQ article in August 2021, companies held over 1.6 million bitcoin, equivalent to 8% of the total supply. Microstrategy Inc. is the largest bitcoin hodler, with 129,218 bitcoin on the balance sheet, equivalent to $2.8 billion at a current bitcoin price of $21,637.

The Bitcoin Rich List gives the market a snapshot of who are the biggest bitcoin hodlers. Address holding details are available due to the transparency of blockchain technology that enables the tracking of bitcoin and bitcoin holdings by the wallet address.

According to BitInfoCharts, several crypto exchanges appear in the top ten of the largest bitcoin holders. Others, however, are the Bitcoin Whales.

BTC Wallet Distribution
BTC Wallet Distribution

One Binance wallet currently has the largest bitcoin holding, totaling 252,597 BTC, accounting for 1.32% of supply. Two other Binance wallets appear in the top ten, with a combined holding of 226,617, which accounts for 1.19% of the total supply.

The wallet with the largest holding not linked to any exchange holds 132,324 BTC. For bitcoin, the more Bitcoin Whales hold, the higher the price and the greater the price stability due to lower supply and daily volumes. Hodlers are in it for the long haul and can bring down daily trading volumes.

To put it into perspective, BitInfoCharts provides a Bitcoin Distribution Chart to show where the bitcoin is.

As shown above, 4,919 wallets hold bitcoin with a value of $10,000,000 or more.

Countries Buy into the Bitcoin Story with El Salvador Leading the Way

Looking beyond the Bitcoin Whales and corporations holding bitcoin, countries have also taken a keener interest in moving away from fiat currency and the influences of the US Dollar.

The largest bitcoin nation is El Salvador, holding a reported 2,301 BTC in the treasury.

Other countries are less public, though through seizures due to criminal activity alone, countries including the US are likely to be sitting on a sizeable number.

Ultimately, it all boils down to supply and demand. More Bitcoin Whales means a lower bitcoin supply. A smaller bitcoin supply would tip the scales in favor of the lofty 2025 projections.

However, a seismic event that leads to Bitcoin Whales, corporations, and countries offloading their holdings could see bitcoin end up at levels not seen since the early days. A ‘bitcoin killer’ event would be an event from which bitcoin and the broader market cannot recover.

Considering the bitcoin fluctuations over time, however, many will consider the upward trend more likely, supported by the continued increase in bitcoin adoption and rise in the number of bitcoin hodlers.

That makes the bitcoin distribution chart all the more important to those looking to buy and hold. An upward trend in the number of wallets holding 10 BTC or more would support a bullish outlook.

The maximum supply of bitcoin stands at 21,000,000 BTC. Wallets with 10 BTC or more hold 149,070 BTC in total, accounting for just 0.71% of the total supply.

This article was originally posted on FX Empire