The Whales' Playbook: How They Harness Down Trends for Short-Term Gains
Let's serenade the 'Sell in May' of 2023 in style, altcoin vs. memecoin: who's going to zero, and the mysterious whales' acts revealed! Brace yourself for the ultimate market investigation!
Introduction
The adage "Sell in May and go away" reflects the historical underperformance of stocks from May to October. While cryptocurrencies operate differently, Bitcoin, being the largest cryptocurrency by market cap, has often shown similar patterns in May.
Interestingly, 3 out of 5 Mays in the past have witnessed Bitcoin prices taking a downward turn. Although past performance doesn't guarantee future results, this trend has raised concerns about a potential market downturn in May 2023.
Additionally, it's important to note that we are currently experiencing the meme coin season, which typically occurs towards the end of a bull run cycle, according to historical price movements.
Taking these factors into consideration, it suggests that we may be on the brink of entering another bearish season.
In contrast, there are notable whales who have taken a different stance. Instead of cashing out their assets into stablecoins or fiat currencies, these whales have chosen to increase their stakes in $ETH.
This behavior implies their belief that the bull run is far from over.
1. The List of Whale Wallets that Started to Stake More ETH
Wallet #1: 0xF17ACEd3c7A8DAA29ebb90Db8D1b6efD8C364a18
After nearly 3 months of inactivity, there were notable movements observed from May 5th to May 9th. Two transactions were initiated, transferring $ETH worth 288K from Binance 14 to wallet.
Subsequently, all funds were staked on the Beacon Chain, just one day after being transferred to the wallet.
Wallet #2: 0x70D5cCC14a1a264c05Ff48B3ec6751b0959541aA
This whale withdrew 64,100 $ETH from Binance US 2 on May 8th and commenced staking on the Beacon Chain, leaving only 10 ETH remaining in the current wallet.
Wallet #3: 0x70D5cCC14a1a264c05Ff48B3ec6751b0959541aA (Celsius:9074)
This last wallet has been tagged by Celsius since May 10 and has been actively staking with a total of 40,960 $ETH on the Beacon Chain.
Despite the whales' wallet experiencing a minor setback, the losses incurred are relatively low, ranging from 2% to 4% (based on the current price of $1,800 at the time of writing).
2. Why Did They Stake More ETH?
Based on our research, it appears that whales are staking more ETH on the Ethereum network due to its high Annual Percentage Rates (APR) during the current period.
2.1. How High Was the APR?
According to beaconchain, in March 2023, the staking reward on the Beacon Chain reached its peak due to the trending popularity of LSD (Liquid Staking Derivative). This innovative platform attracted numerous investors as it offered the flexibility to stake any desired amount of ETH, rather than requiring the full 32 ETH for validator status.
This period also preceded the Ethereum Shapella Upgrade, prompting many individuals to stake additional ETH, knowing that staked ETH would not be able to withdraw until after the upgrade is successfully established.
Therefore, a significant surge in ETH staking occurred, resulting in a substantial rise in staking rewards for ETH investors.
However, despite expectations that the Shapella upgrade would lead to a significant number of investors un-staking their ETH, potentially causing a decline in the Total Staking Reward and APR (annual percentage rate), the opposite occurred.
Surprisingly, the APR continued to rise to as high as 8.617%. So how is this possible?
2.2. How Did It Reach Such Levels?
We suspect that the rise in APR is likely due to the influence of meme coins, particularly $PEPE, which have caused a substantial increase in transactions on Ethereum in a short time.
As a result, gas fees surged, potentially driving up the APR.
Details
$PEPE, built on the Ethereum blockchain, has garnered substantial attention due to its LP burn mechanism, effective marketing strategies, and impressive price movements.
Following its Stealth Launch, the price of $PEPE experienced a substantial surge, prompting investors to FOMO (fear missing out) on other meme coins like $WOJAK, $BOB, $MONG, and even contributing to the growing popularity of $AIDOGE on Layer 2 Arbitrum.
As the momentum of meme coins continues to gain traction, both retail and institutional investors are pouring funds into Ethereum to acquire these assets, leading to gas fees reaching as high as 234 Gwei on May 6th.
The meme coin craze has caused a significant drop in the value of altcoins as investors are shifting their funds to $ETH/$WETH to invest in meme coins on the Ethereum chain, following the lead of whales in hopes of increasing their returns.
As a result, many long-term holders of altcoins have had to sell at a loss.
This also raises the question of whether this is a deliberate tactic by large whales and market makers to shake out weak investors and potentially buy back the altcoins at lower prices.
3. Is BRC-20 a Real Trend or Just A Noble Variant of “Meme Coin”?
Amidst the meme coin season, the rise in popularity of BRC-20 tokens was driven by the initiation of user registration on the Unisat marketplace, which specifically facilitates the trading of BRC-20 tokens and consequently added to the traffic jam on the Bitcoin network.
And how convenient, a significant portion of BRC-20 tokens are meme tokens, further attracting the attention of investors to delve into this “inconclusive” market segment.
The lack of clear innovation in BRC-20 tokens, hence the ‘inconclusive', should be highlighted here since they do not possess any tangible advancements at this time. Additionally, this type of token could introduce more complexity by necessitating separate wallets. Not to mention the hype surrounding it has likely originated from the misleading notion of providing the same level of security and trustworthiness as Bitcoin. But this is a story for another day.
Regardless, as a consequence, altcoins experienced a further decline in value when retail investors redirected their focus toward purchasing BRC-20 tokens.
Open Conclusion
The question remains as to whether these actions serve as a means for whales to capitalize on short-term gains from ETH staking or if they are part of a strategy aimed at shaking out retailers, paving the way for whales to acquire assets at more favorable prices.
It is possible that both intentions are at play in this scenario, highlighting the complexities and motivations within the market dynamics.
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