Most of the volatility in the cryptocurrency market especially in the last two weeks has been associated with the buying and selling pressure caused by large accounts AKA whales. It is no secret that such accounts have a huge impact on price movements and thus constitute price manipulation which has also been evident through Wyckoff distribution and accumulation in the last few weeks. There is a chance that we will continue seeing such price action in the crypto market with the increased involvement of companies like Grayscale Investments.
Grayscale is one of the leading crypto investment companies. It currently has three investment funds that are SEC-compliant, including the recently added digital large-cap fund. The latter includes multiple cryptocurrencies including Bitcoin, Ethereum, Litecoin, Cardano, Bitcoin Cash, and Chainlink. The fund will buy and sell these cryptocurrencies on behalf of investors especially institutional types of investors. This will allow them to circumvent the regulatory limitations that prevent them from benefiting from crypto price movements.
The year 2021 has so far provided enough proof that the crypto market is here to stay and as such, it is highly attractive to institutional investors. Grayscale happens to be an ideal avenue through which they can indirectly access the market or at least some of its benefits without going through regulatory hurdles. This approach will increase Grayscale’s buying power, allowing it to execute bigger positions in the crypto market.
Interestingly, the recently announced investment fund comes at a time when there is increasing concern about inflation in the U.S market, as well as concerns of a housing bubble. These problems are linked to the U.S Federal Reserve’s huge appetite for money printing in 2020 and 2021. Traditional investors are aware of these problems and have been looking for a way to shield themselves from the potential fallout of the rising inflation and the crypto market happens to be an ideal solution.
It is thus no surprise that companies like Grayscale are becoming more popular given that they provide a bridge for institutional money to access the digital currency market. We will likely see crypto market caps increasing substantially due to the influx of institutional money especially in the crypto coins that are part of Grayscale’s large-cap fund.
Those that constantly monitor the cryptocurrency market’s performance know that the market’s volatility increased significantly when retail traders joined the bandwagon. Companies like Grayscale are not in it for long-term hodling like most of the retail investors involved in the crypto market. Instead, their focus is generating maximum value for investors. Buying low and selling high allows them to generate those profits quickly thanks to their deep pockets, which enable them to manipulate prices.
The crypto market will likely experience even more volatility in the future as Grayscale and other crypto investment companies flex their muscles. Whale movements might negatively affect hodlers, but it also presents an opportunity for retail traders to make some money by investing like the whales. Unfortunately, it is not easy to know when the whales will buy or when they will sell. For example, you might think that a cryptocurrency like Bitcoin has dipped low enough and then more selling might push its price down further.
On the other hand, market reports always present an opportunity for investors to make investment moves based on expectations. Whales usually take advantage of market news to sell some of their holdings, then they reaccumulate at lower price levels. This is a good approach for avoiding large losses while also buying back at discounted price levels.
Sydney has 20+ years commercial experience and has spent the last 10 years working in the online marketing arena and was the CMO for a large FX brokerage.
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