Even “Whales” are now Shaken by Bitcoin’s Steep Fall
- El Salvador’s great challenge
- Tesla sold 75% of its own Bitcoin
- More than 1 billion USD of MicroStrategy "vanished"
- Miners continuously “dump” BTC
The plunge of Bitcoin has not only caused retail investors to suffer severe losses, but also even forced the largest “whales” in the market to take various specific actions to limit the risks to their investment.
El Salvador’s great challenge
El Salvador made history on September 7th by becoming the first country to adopt Bitcoin as a currency. However, a number of world organizations strongly opposed this move, including the International Monetary Fund (IMF), the World Bank (WB) and the Bank of England.
Despite all these criticisms, President Nayib Bukele remains firmly in favor of Bitcoin. Since September 2021, Mr. Nayib Bukele has been public on his personal page about the Salvadoran government's buying and selling of BTC. As of now, the Salvadoran government is holding 2,381 Bitcoins. However, with the market downturn, El Salvador is losing about 52 million USD, equivalent to a decrease of 47.58% and the country claims to have not sold any BTC yet.
The somewhat reckless "bet" from El Salvador has contributed to the country's bond prices also falling into a serious crisis. Unexpectedly, one of the largest US banks, Morgan Stanley, has expressed a willingness to buy El Salvador bonds despite being among the worst performing bonds this year.
The reason given by the bank was that El Salvador's bonds were over-sanctioned. Morgan Stanley warns that there is a chance the country will default on its debt in early 2023, but also said that tightening global liquidity could make this impossible. So El Salvador can still meet its obligations for another year without missing its bond payments.
Tesla sold 75% of its own Bitcoin
In its quarterly financial report on July 21, Tesla confirmed that it had sold 75% of its investment in Bitcoin, worth $936 million. As a result, the company's BTC assets at the end of June 2022 were only $218 million, down sharply from $1.26 billion previously.
Tesla's Q2 2022 revenue also fell from 9.7%, down to $16.9 billion from the first quarter, while profit was $4.2 billion, down 22.5% from the first three months of the year. Tesla CEO Elon Musk stated that Tesla's decision to sell Bitcoin was aimed at increasing cash reserves because the COVID situation in China is having a strong impact on the company's operations.
However, the richest billionaire in the world confirmed that Tesla is ready to buy back Bitcoin in the future; he even shared that Tesla's action of selling BTC should not be seen as their final stance on the world's biggest cryptocurrency. In addition, Tesla CFO Zach Kirkhorn revealed that with the remaining Bitcoins Tesla is holding, about 10,800 BTC, the company is losing up to $ 106 million.
Interestingly, Elon Musk said Tesla has yet to sell Dogecoin (DOGE). After temporarily suspending accepting Bitcoin payments due to concerns about environmental pollution, Tesla and Elon Musk have turned to support Dogecoin, when they accept payments by this coin for some of the company's products, and intend to expand the payment method to both SpaceX and Starlink.
More than 1 billion USD of MicroStrategy "vanished"
As of July 24, the whale considered to be the world's largest Bitcoin holder, MicroStrategy, is holding up to 129,218 BTC, when they start to accumulate from 2020, with an average purchase price of 30,700 USD. With the Bitcoin price hovering around $22,000 at the time of this article, MicroStrategy has lost over $1 billion, which equates to a 27% drop from its initial investment due to the continuous issuance of debt bonds to raise capital. instead of using the company's money directly.
However, MicroStrategy CEO Michael Saylor is confident that Bitcoin's short-term downturn is not a big deal for the company. He even asserted that MicroStrategy would not sell Bitcoin despite the risk of liquidating a BTC mortgage.
“Once MicroStrategy adopted a long-term Bitcoin investment strategy, the company predicted future volatility and balance sheet structure to be able to continue to hold Bitcoin during the most difficult times,” the CEO of MicroStrategy reassured the community on Twitter.
According to Michael Saylor, Bitcoin would have to drop 95%, below $3,600, in order for Microstrategy to run out of Bitcoin to repay a loan to Silvergate, the banking institution that works with its subsidiary MacroStrategy, which gave the company a a loan of $205 million in March 2022 to continue to buy another $190 million in Bitcoin.
Miners continuously “dump” BTC
In a bull market, Bitcoin miners tend to hold most of the Bitcoin produced. However, when the dark times came for Bitcoin, which broke the $20,000 mark for the first time in 18 months, many miners were forced to abandon the long-term accumulation strategy by selling to balance the costs of doing business.
However, for a better overview of the transition in the transaction status of miners during the past two quarters, please refer to the article below:
According to a report from blockchain analytics firm Arcane Research, in the first four months of 2022, mining companies sold off 30% of their Bitcoin production. The sharp drop in mining profits forced these companies to increase their selling rates to more than 100% in May, when Bitcoin mining revenue recorded its worst decline in 2022.
On the other hand, based on CoinMetrics data, miners are consistently considered to be one of the largest “whales” in the industry, holding around 800,000 Bitcoin, of which mining companies own around 46,000 BTC. Therefore, assuming they are forced to liquidate a significant portion of their Bitcoin holdings if the market outlook continues to turn negative, this could contribute to an even lower Bitcoin price in the future.
With this analysis, BHO Network team hopes to help investors better understand the current situation, as well as the reactions of today's popular Bitcoin "whales", so that they can make the right investment decisions in the near future.
Published on July 25, 2022
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