When it Comes to a Bitcoin Reversal, Trust the Big
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- Everyone wants to know when Bitcoin will reverse, but no one can read the future
- We can however get a clue from the actions of big buyers
- Data shows that those who buy on the same day as whales rarely lose out
Bitcoin is in decline, and everyone is looking for signs that it is about to reverse. Of course no one knows when this will be, and picking the bottom (like picking the top) is a matter of luck as much as judgement, but we can look to previous buying data to see how big buyers act in such situations. And the results are enlightening.
Bitcoin Big Buyers Don’t Lose
Knowing when to buy bitcoin in a downtrend is a tricky business, and no amount of charts can identify where the bottom will be, only where it might be. In studying historical trading data however we can look at what smart money does and what happens when the big buyers step in.
The chart below is very illustrative of a simple pattern that medium term holders would do well to follow. Each blue line represents a day of high volume, with the 11 lines here representing the 11 highest buying volume days since November 2019 on Binance, the highest volume exchange:
Assuming they bought at the end of the day (i.e. the top of the candle body) and sold at the top of the next cycle peak, here is a breakdown of how well those big buyers performed:
As we can see, the big buyers certainly know when to time their bids, with the vast majority being in profit the following day and the longest wait being a mere three days. The big buyers also bought and held at key points in the cycle, with the shortest buyer holding for 10 weeks until the cycle top was reached.
The buyers who performed the best were those who bought during the March 2020 crash, with three of the top 11 candles all occurring within a week of that event. The worst performing big buyers still timed their buys well, making a 70% profit by the end of the cycle.
Emulate to Accumulate
So what’s the upshot of all this? If you want to be sure that the market is going in the right direction, or is about to reverse, look for these big green candles – then buy, and wait. This philosophy is borne out by the fact that we have seen no daily buy volumes anything like we saw in May 2021, despite prices returning to similar levels.
This suggests that the big buyers that one would have thought would be stepping in now simply don’t have the confidence in the cryptocurrency market to do so. This is very illustrative of the crypto landscape right now, and is something that you should certainly pay attention to if you are on the sidelines.
When these guys get back in the market then it’s time to take action.