Reading 4 min Views 6 Published Updated
The price of Bitcoin fell heavily yesterday despite a positive surprise in the US Consumer Price Index (CPI) following rumors that the US government sold 9,800 BTC linked to Silk Road. Since then, the market has struggled to recover from the shock.
However, one group of investors is not afraid: the whales. Large investors with big money are considered one of the most reliable indicators of when is the right time to buy Bitcoin. OnChain analyst Axel Adler stated: “BTC accumulation and distribution is unchanged. Large players continue to buy BTC from smaller players.”
The chart below shows that investors with more than 5,000 BTC have bought large amounts (along with smaller investors <10 BTC) over the past 30 and 90 days, while all other groups have been losing BTC.
Accumulation and distribution of Bitcoin by cohorts | Source: Twitter @AxelAdlerJr
What do bitcoin whales know?
Of course, one can only guess that bitcoin whales know what others do not. But the fact is that yesterday, after the publication of the consumer price index, bitcoin showed an uptrend, until fake news (manipulation?) appeared that the US government was selling bitcoin.
But yesterday’s release of the consumer price index may be much more important than it seems at first glance. For some time now, the market has been betting on an early reversal by the US Central Bank (Fed). The market is currently betting on three interest rate cuts before the end of the year (3x 25bps to 4.25-4.50%).
While the US banking crisis reinforces this bet, the whales may have been exposing the Fed’s bluff for some time. As NewsBTC editorial director and technical analyst Tony Spilotro recently noted on Twitter, the Fed (and the masses) rely on lagging indicators.
Remember: CPI is a lagging indicator. The stock market is a leading indicator.
— Tony “The Bull” (@tonythebullBTC) May 10, 2023
Charlie Bilello, chief market strategist at Creative Planning, highlighted on Twitter that the US CPI fell from 9.1% last June to 4.9% in April. According to a prominent analyst, the reason for this decline is lower inflation rates for fuel oil, gasoline, used cars, gas supplies, medical care, clothing, new cars, food for the home and electricity.
y/y change in inflation |Source. Twitter @charliebilello
Inflation rates in transport, food out and housing have risen since last June, but declines in other major components have offset these increases. The fact that the U.S. core inflation index (excluding food/energy) is still at 5.5% y/y is mainly due to the consumer price index for housing (+8.1% y/y), Bilello said. calculus):
Why is the housing consumer price index still rising while actual rent inflation has been declining for some time? The housing consumer price index is a lagging indicator that greatly understates true housing market inflation in 2021 and the first half of 2022 .
Biello added that after 25 consecutive year-on-year increases, the consumer price index for housing fell for the first time in April from 8.2% in March (the highest level since 1982) to 8.1% in April. If housing inflation finally peaks, it will have a big impact on the overall consumer price index, as housing makes up more than one-third of the index.
Is deflation coming fast?
This opinion is shared by the head of the research department of Fundstrat Thomas Lee. In an interview, Lee said inflation would come down faster than most people think, and that would make the Fed pause more comfortable for investors as it leads to a soft landing.
For Lee, this is one of the key implications of yesterday’s April CPI report. Carl Quintanilla of Fundstrat added:
40% of the CPI basket (by weight) is in direct deflation. This is a huge development. Housing and food are not “deflated”, although real-time measurements show this. It will add another 50% or so when they do.
For Bitcoin, a rapid fall in inflation and a soft landing, as Lee predicted, could be extremely optimistic. Whales can use this phase to accumulate, while retail investors sell assets, fearing a looming recession with high inflation.
At the time of writing, the price of Bitcoin is trading at 27,550, returning to a lower range.
BTC price back to lower range, 4-hour chart l Source: BTCUSD on Tradingview.com
