Bitcoin panic-sellers are “practically giving away” their cryptocurrencies to wealthy buyers who will use the digital assets as an inflation shield.
The observation comes as Bitcoin and other leading cryptocurrencies steadied slightly ahead of the U.S. Federal Reserve’s meeting on Wednesday.
Digital currencies fell in price sharply earlier this month before regaining some ground.
The recent selloff was triggered by a wider risk-off sentiment that also impacted many areas of global stock markets.
It occurred as inflation is running hot and, therefore, encouraging central banks to tighten monetary policies, putting at risk the liquidity that has benefitted a many asset classes, including Bitcoin.
Wealthy crypto investors always buy in the dips. This is because they know that digital, global, borderless, decentralised money is, clearly, the future.
Bitcoin has almost doubled in value since January 2021- how many other investments can say that? But this year was not without the crypto market’s trademark volatility.
And the volatility is always used as buying opportunities by rich traders to top up their portfolios.
Could this explain why so many of them send out ‘warning shots’ about selling crypto when things are a bit turbulent on social media? It seems very likely.
Those Bitcoin panic sellers are practically giving away their cryptocurrencies to wealthy buyers who accumulate, accumulate, accumulate.
This scenario seems particularly likely in the current situation as they are increasingly worried that their cash, and therefore spending power, is being eroded by soaring inflation.
Central banks – including The Fed which will make a key announcement on Wednesday – are now being forced to act in order to combat inflation.
Bitcoin and other digital currencies are widely regarded as a shield against inflation mainly because of its limited supply, which is not influenced by its price.
In this inflationary period, Bitcoin has outperformed gold, which has been almost universally hailed as the ultimate inflation hedge - until now.
To support his argument, he points to the fact that the third-largest holder of Bitcoin added more than $150 million of the cryptocurrency to their holdings following the recent flash crash. Figures from BitInfoCharts show that investors purchased more than 3,000 Bitcoins over the last few days.
Prices of Bitcoin and other cryptos can drop by 10% or more in a matter of hours. Indeed, they often do. This is why you need to have a properly diversified portfolio to mitigate risks.
However, history shows that Bitcoin gains have been enormous for those who hold.
Wealthy, long-term crypto investors typically benefit from spooked panic-sellers by buying their digital currencies on the cheap to enhance their investment portfolios.
Doesn’t a Bitcoin price dip seem especially beneficial to those such investors during these times of worryingly high inflation?
Nigel Green is the CEO of the deVere Group
BUSINESS REPORT