Crypto money is Sticky money

in #bitcoin2 years ago

A lot of crypto, be it bitcoin or ethereum, was sold over the last few days and while some of it was sold into other cryptos, the fact that the fall was so broad based it is fair to say most was sold into FIAT. It's that FIAT that I'd like to discuss.

Where has all the money gone?

Currently it is likely sitting in users accounts on coinbase, bitfinex, bithumb, etc. (For the purpose of this let's assume the USDT is FIAT).

The real question is how much of this money will be withdrawn. I contend relatively little. Here's my reasons

  • A lot of the money in the market is from new and small investors that got in between the prices of $1k and $20k.

These investors bought in with 'forget about it money', <1% of their savings, money that if lost will not break them but enough that they will benefit from the 1000% gains they've heard of.

They are not cashing out as they have not made or lost enough to worry them. These tens of thousands of people are sitting with thousands in each of their accounts. And the question is not if they will buy back in, it is when and which coins.

  • Tax implications will keep a lot of this money on exchanges.

While for most tax territories all that matters is that the asset has changed, a lot of traders are either trying to avoid this or are living in ignorance of the fact.

Which ever it is, it means that a significant number of traders, especial the early investors that have made large gains, are hesitant about cashing out and tend to reinvest.

Again this money will likely find its way back into the market.

  • Greed

If you bought on every 40% fall in bitcoins history, you'd be a rich person. Of course there is no guarantee that this will work this time, but that won't stop a lot of traders reentering after a massive fall.

Again this money will be reentering the market.

How to play it?

Always bet on the bounce. The only hard part of this is when to put in your buys. If you read any of my other posts you see that I pick buy points where I see support on the charts. I also just wing it with some day trading on the day of a fall. I look for RSI getting oversold and overall fall getting past 30%. Then suck it up and buy.

So am I saying it's too late? No, if you feel there is still more money sitting on exchanges waiting to buy back in, then it is usually a good time to buy. I would argue there is still a lot of sticky money on exchanges waiting.


Ok of course there will be an increase in withdrawals and some money has left for good, but my point is that money in crypto is at least stickier than in other markets.

As crypto matures and is more regulated this will likely stop been the case and we will likely see less predictable bounces.

Thanks for reading. I would love any feedback on my theory, is there any merit in it? It is lacking any evidence but is there any logical flaws in it that you can see?


My favourite site for trading is Bitmex, as the future contracts allow for lots of arbitage opportunites and the leverage lets me leave most of my stash safe in cold storage. If you don't already use it and would like to sign up, here is a referral link that will get you 10% off fees and rewards me with 10% of the fees you pay, we both win.

A coupld of exchange sites I also use are binance and hitbtc, I find them about as good as the other exchanges to be honest but these have referal links so I figure I'd shill for them.

binance link

hitbtc link

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If you like this post there will be more like it on my posts page, this account will be dedicated to posting about trading cryptocurrencies and maybe a bit of general stock markets.

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Please do not invest on the advice of a stranger on the internet, only use this advice here as a starting point for your own research, and then if you choose to invest please only invest an amount that you can afford to lose.

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I'm a bit confused by the "tax implications" category of your post. Using VPNs and off-shore wallets and exchanges, should prevent the need to worry about taxes from cryptocurrency gains...or am I missing something...?

There are many ways to get away with crimes, but they are still crimes. My point was that there are a lot of people not wanting to either deal with the taxes or circumnavigate the taxes, so they are avoiding the idea entirely by heavy cashing out.

As to whether you need to pay taxes, please talk to an accountant before you do anything that might be illegal.

Yeah...I'm guessing the schooling that an accountant has to receive is engineered by the same government that has misinterpreted the meaning of "income tax" for decades...I'll pass...but thanks for the concern.

Great piece. I’m betting that mom and pop money will end up in ETH and XLM. What coins are you predicting?

I spread my bets around but ETH is my favourite. I have not looking at XLM in a long time, why are you so positive on it?

I see nothing on it that can't be done by others and it has no name recognition. I still have a small stake in it, <0.5%. Am ready to be convinced otherwise

Same I have positions all over the place. I think people associate it with IBM and the tech/team are decent.

like you say @kevinbacon only invest what you can afford to loose.