The shrimp of the crypto world have joined the whales in a glorious last stand to banish the bleak bitcoin winter.
These two contrasting groups are both HODLers – investors in bitcoin as a long-term proposition who refuse to sell their holdings – and they are determined to push back the bears despite their portfolios being deep in the red.
Shrimp, investors who own less than 1 bitcoin, are adding 60,460 bitcoin per month to their balances, the most aggressive rate in history, according to an analysis by data firm Glassnode.
Whales, those with more than 1,000 bitcoin, added 140,000 coins per month, the highest rate since January 2021.
“The market is approaching a HODLer-led regime,” Glassnode said in a note, referring to the cohort whose name arose years ago from a trader who misspelt “hold” on an online forum.
After bitcoin’s worst month in 11 years in June, the decline appears to have abated as transaction demand appeared to be moving sideways, according to Glassnode, pointing to stagnation of new entrants and likely retention of a base load of users, i.e. HODLers.
Bitcoin has hovered around $19,000 to $21,000 in the past four weeks, less than a third of its $69,000 peak in 2021.
“There’s a saying in crypto markets – diamond hands. You haven’t really lost the money if you haven’t pulled out. One day it may come back,” said Neo, the online alias of a 26-year-old graphic designer at a fintech company in Bangalore.
As the crypto bear market enters its eighth month, its crypto portfolio fell 70 percent — though he said the money was “okay with losses.” He has no plans to sell, with a possible resurgence in the coming years.
Like Neo, most HODLer wallets are underwater, but many are refusing to pledge.
About 55 percent of US-based crypto retail investors held their investments in response to the recent sell-off, while about 16 percent of investors worldwide increased their crypto exposure in June, according to a survey of retail investors by eToro.
“Crypto is an asset class that is disproportionately held by younger investors who are more risk-tolerant as they have, say, 30 years to recoup everything,” said Ben Laidler, eToro’s global markets strategist.
PAINS OF MINERS
Another class of staunch crypto HODLers – bitcoin miners – are under increasing pressure as they face the double whammy of crater prices and high electricity costs. The cost of mining a bitcoin is for some miners higher than the price of the digital asset said Citi analyst Joseph Ayoub.
The adverse environment for many of these miners, who have loans against their mining systems, has forced them to pull out of their stock.
Core Scientific sold 7,202 bitcoin last month to pay for its mining rigs and fund operations, bringing its total holdings to 1,959 bitcoin.
While Marathon Digital Holdings said it hadn’t sold bitcoin since October 2020, the company said it could sell some of its monthly production to help cover costs.
The Valkyrie bitcoin miners ETF fell 65 percent last quarter, surpassing bitcoin’s 56 percent decline.
Lessons learned from the crypto winter in 2018 were that the miners who survived were the ones who continued to produce even when submerged. However, that approach is unlikely to work this time around, said Chris Bae, CEO of Enhanced Digital Group, which designs hedging strategies for crypto miners.
For mining company bosses,” Bae added, the focus now is on the “need to think through the next crypto winter and have that game plan before it happens rather than during it.”