Nigel Green, founder and CEO of global financial advisory Devere Group, says bitcoin panic-sellers might be making wealthy buyers richer.
According to Green, the sellers are “practically giving away” their crypto to the rich, who in turn use the accumulated BTC, as an inflation hedge.
“Wealthy, long-term crypto investors typically benefit from spooked panic-sellers by buying their digital currencies on the cheap to enhance their investment portfolios,” said Green in a statement on Dec 15.
Devere Group is an independent financial advisory firm with offices throughout the world. Headquartered in Dubai, UAE, the company has over $10 billion assets under management.
Bitcoin crash
Crypto markets have tanked in recent weeks, with bitcoin crashing 40% from a record high of $69,000 to around $42,000. At the time of writing, each BTC traded for $49,000, up 2% in the last 24 hours, as per data from CoinMarketCap.
BTC has endured wild swings since hitting an all-time high on Nov 10, as fretful investors exited the market due to uncertainty over crypto regulation as well as the global economic outlook.
But as the so-called “weak hands” left the market, crafty, wealthy traders — in contrast, referred to as “diamond hands” — were on hand to buy the assets cheaply and accumulate.
For example, crypto billionaire Su Zhu of Singapore-based hedge fund Three Arrows Capital bought more than $660 million of ETH, while Justin Sun, founder of crypto platform TRON, spent over $7 million on BTC.
Michael Saylor’s Microstrategy bought an additional $82.4 million worth of bitcoin, bringing the company’s total holdings to 122,478 BTC, valued at more than $6 billion. Even nation-states “bought the dip.” with El Salvador snapping up around 250 BTC.
Inflation hedge
“The recent selloff was triggered by a wider risk-off sentiment that also impacted many areas of global stock markets,” said Green.
“It occurred as inflation is running hot and, therefore, encouraging central banks to tighten monetary policies, putting at risk the liquidity that has benefitted many asset classes, including bitcoin.”
Green explained that as BTC doubled in value this year, rich and experienced traders have taken advantage of the asset’s “trademark volatility to top up their portfolios.”
“Those bitcoin panic sellers are practically giving away their cryptocurrencies to wealthy buyers who accumulate…” He added:
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 bank are now being forced to act in order to combat inflation.
Inflation has risen sharply worldwide in recent years with the U.S. increase to 6.4% among the largest. The damage to world economies caused by COVID-19 prompted governments to dole trillions of dollars in stimulus, resulting in higher consumer prices.
While the pandemic ravages economies and other investment products, bitcoin is often considered a hedge asset that will appreciate. In some quarters, it has been described as the crypto market’s version of gold, largely on account of bitcoin’s limited supply.
“Doesn’t a bitcoin price dip seem especially beneficial to those [wealthy] investors during these times of worryingly high inflation?” Green quipped.
Michael Saylor, the Microstrategy CEO, has also spoken about how fiat money is losing style as a reserve asset compared to bitcoin.
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