Thought Bitcoin was “decentralized”? You thought wrong.
Yesterday, Mike Carr showed you how one bankrupt hedge fund potentially sparked a 9% crash in Bitcoin overnight.
That alone shows you the power that just one whale can hold over the Bitcoin market…
And it gets worse. Just 97 wallets control more than 15% of the entire Bitcoin market. At current prices, that represents $57 billion in value.
All it takes is one move from one of these addresses to send Bitcoin prices surging… or dumping.
And while this is a serious flaw for anyone looking to buy and hold Bitcoin… It’s perhaps the cryptocurrency’s greatest feature for someone willing to trade its violent moves.
Today, I’ll show you one simple method to track when a Bitcoin whale is pumping or dumping the price.
It’s something that allegedly great investors seem to have missed. And as a result, one such investor is now down well over a billion dollars…
The Biggest Whale of All
One of the biggest, if not THE biggest Bitcoin whale is MicroStrategy (MSTR), headed up by CEO Michael Saylor.
MicroStrategy first took an interest in Bitcoin at the end of 2019. Sales were steady, and gross profits were 79% of revenue. But the company had over $560 million in cash on hand.
That might not sound like a problem, but it is for a CEO.
A CEO’s job is to allocate capital effectively. Especially if that CEO runs a public company with shareholders who ask questions about the enormous cash pile.
Michael Saylor’s solution was to buy hundreds of millions of dollars in Bitcoin. He believed that would generate the largest possible shareholder returns.
After months of debate, he convinced his board of directors. The company announced its plan to invest at the end of July 2020. Within two weeks, they’d purchased $250 million of Bitcoin.
With that in mind, take a look at this chart.
(Click here to view larger image.)
The indicator at the bottom is the money flow index (MFI), a measure of buying pressure that I introduced on Monday. It’s represented as a histogram, similar to the MACD.
MFI began to spike as MicroStrategy started its first investment in August 2020. Not surprisingly, it took some time for the company to complete its large purchase.
You can see that as MSTR entered the market, the MFI jumped.
Buyers as large as MicroStrategy can’t hide their actions. Even without a public announcement, clever traders monitoring MFI would’ve known a whale had taken interest in the asset.
Bitcoin prices rallied up to $12k after the first announcement. Not a whole lot happened after, though. Bitcoin spent the next two months going mostly nowhere.
But at the end of 2020, MSTR announced another buy for more than twice the original amount. Again, we can see the MFI spike in December 2020.
This time, the Bitcoin price skyrocketed. It broke the previous all-time high and ran to $40,000.
At those prices, MSTR tripled down. It bought $1 billion in Bitcoin in February. Again, we see the MFI spike just before the company’s announcement.
By April 2021, Bitcoin was over $60,000.
Saylor looked like a genius. Bitcoin seemed to be taking over.
But you know what happened next. Bitcoin dumped into summer 2021, recovered in the fall, and then dumped again at the end of the year. Today, it stands at $20,000.
But that didn’t faze MicroStrategy. The company made 19 additional purchases of Bitcoin from February 2020. Most of these purchases weren’t made with cash, but convertible senior notes that would pay 0.75% yield in 2025.
As of April 4, the company now holds 129,218 Bitcoins worth $2.5 billion. The issue is MSTR spent $3.9 billion acquiring these Bitcoins. That works out to a $1.4 billion hole. And the company’s average cost is $30,000.
You’d think a CEO with so much capital at their fingertips wouldn’t let this happen. But Saylor made the same mistake most people buying Bitcoin make. They think they can just sit on their hands and hope it goes up forever.
Here’s what he should’ve done instead…
Your Bear-Proof Bitcoin Strategy
Mike Carr has long held that Bitcoin is a lousy investment.
You might look at its long-term history and say Mike is crazy. And you’d have a point — Bitcoin has returned thousands of percent over the last several years.
But Mike has created a trading strategy that turns even that performance into an embarrassment.
By simply refusing to buy and hold Bitcoin forever, and instead trade it up and down, Mike’s strategy would’ve produced a 43,000% return over the last seven years.
That makes Bitcoin’s 8,600% return look modest.
For this strategy to work, Bitcoin just has to move…
And thanks to speculators like Saylor — plus the hundreds of thousands of small investors who live and die by the asset — it always will.
You can access it by going to BeatBitcoinNow.com.
Regards,
Amber HestlaSenior Analyst, True Options Masters
