What does this years Christmas sale have in store for cryptocurrency market in the upcoming days?
Christmas is approaching and many are expecting the exhibition art to intensify. No, not on the streets of our city, where the shops are getting ready too early for the Christmas sale. Instead, we're talking about the thing’s portfolio managers need to do to place the right bets in 2021. Could this happen to the cryptocurrency market in the next few weeks? If a mutual fund's past behavior is the benchmark, window dressing may not be the driving factor, but there are still things portfolio managers do or don't do that help push up the prices of assets in their portfolios before the new year's rise.
For those unfamiliar with this theory, the exhibit is the idea that portfolio managers sell their losing positions and buy more of their gains before reporting at the end of the year, so they appear to have made the right move. Among other things, it can penalize securities that have been lost and pump winners higher. Many studies have been done to suggest this might be the case, but they usually use quarter-end data to draw their own conclusions.
However, a 2014 study published in the Review of Financial Studies used current data on mutual fund trading from 1999 to 2010. Although they found no evidence of typical window dressing, gang researchers found Hu, R. David McLean, Jeffrey Pontiff and Qinghai Wang found something more nuanced. "We find that very high institutional buying and very low institutional selling are associated with price inflation," they wrote. “In addition, we show that the proportion of purchase transactions increased sharply in the days at the end of the quarter and, in particular, at the end of the year. Further analysis shows that institutional purchases declined towards the end of the year, while institutional sales declined further towards the end of the year, resulting in a high proportion of purchases.
In general, Funds increased their buying of their larger positions in stocks throughout the year end but stopped selling at higher prices. This in turn contributes to higher prices for these assets. According to researchers, there may be a reason for this. “We found no evidence of targeted sales at the end of the year; the decline in sales was not greater for stocks in which institutions held large positions. However, unlike buying shares, delaying the sale of shares is, in most cases, invaluable. Therefore, it makes sense for managers not to sell stock at the end of the year if they are concerned about the value of their net assets at the end of the year.
Nevertheless, institutionally targeted crypto card sales can happen if an analyst is right. Edward Moya, senior market analyst at forex trading platform Oanda, expects fund managers to issue their winners for an annual profit. According to him, the recent rally, fueled by unexpectedly high US inflation data, made it more attractive for managers to sell their bitcoins.
“If inflation concerns escalate, it will even be negative for Bitcoin price chart because what will happen is that you are nearing the end of the year and the whole of Wall Street wants to show that it is profitable in cryptocurrency business trading,” Moya said. in the First Mover program on Wednesday. "If Bitcoin price goes up by more than 120%, [ether] more than 550%, I think you're likely going to make a decent profit. So, I think it's going to be a big risk you're going to be taking in the short term." Contrary to popular belief that Bitcoin value will rise due to fears of inflation, Moya predicts that the argument will work against cryptocurrencies until at least December 31.
If inflation picks up at its current rate or faster, "I think you're going to see some panic selling," Moya predicts. “When we have a big risk reversal on Wall Street because Bitcoin is one of the most profitable trades, you usually find weakness. So, at some point, over the next few months, you're going to have a decent drop, maybe 10% or maybe. 20% But then I thought that eventually the long-term uptrend would be confirmed.
Consider the average trade size across several exchanges. While this is an imperfect measure, some assumptions can be made. If the average trading volume increases with falling prices, this could be an indication that large holders such as e. B. Dismantling the institution. If the average increases during the upgrade, this may indicate a bigger buy. While Bitcoin has fallen just under 6% since its peak early last week, it is still up 13% in the last 30 days.
As it turns out, according to data provider Kaiko, the average trade size tends to go up. The company looks at the average daily trade size across eight exchanges since 2017 - Coinbase, Bitstamp, Kraken, Bitfinex, Gemini, Bitrex, ItBit, and LMAX Digital (which has only one year to date) - which are hugely popular with institutional traders. As the chart shows, the average trade size is lower than the spring peak in 2021.
However, when the weighted average is used, the trading average seems to have recovered over the last few months. They weren't anywhere near their high of around $3,000 earlier this year, but have improved from a recent low of nearly $2,000 and are now around $2,376 over the last 30 days.
Do you sell fiddles for bitcoin?
Of course, Bitcoin isn't the only game in town when it comes to cryptocurrencies. And those familiar with so-called altcoins can instead sell them and return them in cryptocurrency, according to Rich Rosenblum, co-founder and president of trading firm GSR. He said there are many other factors, such as the new Exchange Traded Funds (ETFs) based on Bitcoin futures that have entered the market in recent weeks, beyond what the funds are doing. Rosenblum also said his company expects Bitcoin to end the year with the highest value ever.
“People are taking advantage of their [old] tokens [and] turning them into Bitcoin because Bitcoin is excluded from the risk,” Rosenblum told First Mover last Thursday. "It's not a stablecoin, but I rarely hear people think they can come back under $50,000... If you've made significant gains in other aspects of cryptocurrency, instead of going back to stablecoins or cash, you can put your money in Bitcoins.” I think in the last month you have gotten a lot of wind into Bitcoin because of the incredible power that is in the token.
There are only seven weeks left of the year and there seems to be no consensus on who will win: the HODLers (sustainable battery) or the winners. At the very least, it's worth keeping an eye on the average Bitcoin trade size and fiddle behavior in the coming weeks for evidence.