A study released by Chainalysis indicates that Bitcoin “whales” are, in fact, a positive and stabilizing force in the Bitcoin market overall. Also, the study has categorized these owners of large sums of Bitcoin into four types: trader whales, miner and early adopter whales, lost whales and criminal whales.
There is often hype that these Bitcoin owners leverage their holdings to manipulate the market. A recent example was in August 2018 when a trader with USD 2 billion of Bitcoin was blamed for causing a 15% price decline by selling BTC 50,000 worth USD 300 million in a month.
However, the study points out that these owners are the ones that have the most to lose if Bitcoin’s price goes down since they hold the most amount of Bitcoin. It shows data demonstrating how whales are actually a stabilizing force in the Bitcoin market, often buying when price declines, helping stabilize and reverse price declines. In fact, as a whole, they consistently invest more in Bitcoin than they divest; there was no time during the past year where whales as an aggregate sold more Bitcoin than they bought. Therefore, they apply positive pressure on Bitcoin’s price in the long term.
Chainalysis finds that not all whales are made equal. It identifies trader whales as the most active and relevant as they regularly buy and sell Bitcoin on exchanges and, therefore, have the most impact on Bitcoin’s price compared to other types. Of the 32 entities analyzed, the trader whales control BTC 332,000 worth over USD 2 billion. This is actually a relatively small amount considering that Bitcoin’s daily trading volume if often USD 5 billion per day or more on spot exchanges alone and not including OTC markets, showing how this group couldn’t impact Bitcoin’s price that much even if it wanted to.
Those identified as miners or early adopters came into large amounts of Bitcoin early. Chainalysis finds that this group has very low trading activity and made significant divestments during 2016 and 2017 as Bitcoin’s price rose.
Lost whales are people that lost their private keys, which is assumed based on their lack of activity since 2011. These aren’t true whales since they are just idle wallets that can’t interact with the market at all. Supposedly, BTC 212,000 worth USD 1.3 billion lie in this category.
The final species identified are criminal whales, linked to darknet marketplaces like Silk Road and illegal activities such as money laundering. These control BTC 125,000 worth USD 790 million, making them the smallest group of Bitcoin whales.
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