Research: Bitcoin (BTC) Whales Not Moving the Cryptocurrency Market

Research: Bitcoin (BTC) Whales Not Moving the Cryptocurrency Market

Photo by John Gibbons on Unsplash

Blockchain research firm Chainalysis released a report stating “whales,” or holders with a large token holding, are stabilizing cryptocurrency prices, instead of the popular belief that they manipulate the $215 billion crypto market.

Whales Stabilize BTC Prices

The rumors seem to originate from outsized bitcoin holders selling off their currencies at periodic intervals, causing considerable drops in BTC prices each time. Of such reports, the most recent originated in August 2018 after a holder sold 50,000 BTC, cumulatively worth over $2 billion, in a month and created a 15 percent plunge in the asset’s price.

Bitcoin’s infamously steep price drops cause panic amongst investors and industry observers while propagating a myth of the market being controlled by a few investors. However, an analysis of the 32 largest wallet holdings proves these statements are mere speculation.

Chainalysis researchers found out that most whales are dormant traders, and have held most of their BTC since purchase. Only 33 percent of analyzed wallets seemed to take part in the markets actively, and while they certainly have the funds to move the market on a whim, active whales were seen buying more BTC during market lows instead of causing the sell-offs.

Whales appear to stabilize the market during meltdowns, and from a trading standpoint, their vested interest could lead to “buying the dip” instead of participating in a market crash. Also, most whales used OTC platforms to manage large transactions, instead of selling their coins on a liquid cryptocurrency exchange.

“Whale” Groups Explained

Chainalysis classified crypto-whales into four groups based on the trading activities of the 32-largest BTC wallets. Together, they hold 1 million bitcoins or 4.7 percent of the total supply and account for $6.3 billion of the market cap.

The first group, whale traders, are those who transfer their holdings to exchanges to readily buy, sell, and trade bitcoin. For instance, nine observed wallets hold $2 billion in 332,000 BTC and make for the largest whale category. Interestingly, most of these whales entered the market in 2017, indicating the wallets and could be actively-managed crypto hedge funds as they saw an uptick last year.

The second group is made up by early adopters and Bitcoin miners, which entered the market much earlier than 2017. The classification includes 15 investors holding more than 332,000 BTC, and display “extremely low” trading activity. Most of these whales liquidated their holdings in 2016/17, and are likely “extremely wealthy.”

Moving on, the third group consists of “lost” whales, which hold 212,000 BTC worth $1.2 billion as per current prices. Unfortunately, these whales have presumably lost the private keys to access their wallets, as observed addresses shown no transactions since 2011.

Criminal wallets make up the last category in the list, consisting of Silk Road entrepreneurs and money launderers who hold 125,000 BTC, or $750 million, on their now-locked wallets.

Chainalysis researchers noted Bitcoin whales might continue to be a “mysterious” fixture for the cryptocurrency community; they have “less of an impact on market prices than many people believe.”

In conclusion, collated data suggests trading whales were net purchasers of BTC during December 2017 and “most of 2018.” Whales have not sold their holdings in a large amount yet, and instead, received more bitcoins from exchanges in 2016 and early-2017.

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