In both the natural world and the crypto market, whales are seen as colossal creatures that have a profound effect on the environment around them. Since Bitcoin’s rise to fame, a countless number of cryptocurrency investors have claimed that whales have been the primary catalyst behind this market’s unpredictable price movements. But, according to data compiled by one of the crypto industry’s data analysis groups, the whale theory is nothing more than a popular urban legend.
Killer Crypto Whales? Think Again.
As reported by NewsBTC in early-September, following a 20% decline in the value of Bitcoin, the cryptocurrency community flew into a frenzy, as it wasn’t immediately clear what caused the influx of sell-side pressure. Eventually, internet sleuths uncovered a specific, whale-owned Bitcoin wallet that transferred over 15,593 BTC to Binance and Bitfinex in the days preceding the 20% sell-off.
Although this could have been a rather untimely coincidence, many began to comprehend that the multiple to-exchange transactions which amounted to 15,593 BTC, valued at over $100 million, should be blamed for the move.
Contrary to popular belief, however, Chainalysis, which analyzes the cryptosphere as its name implies, revealed that this is far from the case. According to a study published by the startup’s team of analysts, the fears that whales could undermine crypto assets values are evidently “overblown.”
The post-mortem of the study, which took the form of an article that was fittingly titled “The Not-So-Killer Whales of Bitcoin,” first expressed that whales may not be as influential as many would initially think. Manhattan-based Chainalysis revealed that the 32 wallets it put under the microscope represent only one million BTC, which are valued at $6.3 billion at the time of press. While $6.3 billion isn’t a figure to scoff at by any means, Bitcoin’s total market capitalization has swelled to a $110 billion valuation, indicating that whales aren’t the only game in town.
Even though a $6.3 billion sell-off could decimate order books, only one-third of Bitcoin’s 32 largest holders are active in today’s market. This subset of Bitcoin whales, which the analytics firm refers to as “traders,” control 332,000 coins, which is approximately one-third of the collective value of all whale holdings. Interestingly enough, this group of users main consists of users who entered the cryptosphere in 2017, indicating that many “trader” whales were drawn in by the most recent bull run, which saw Bitcoin run from $1,000 to $20,000 in 12 short months.
It is important to note that miners and early adopters, who also hold 332,000 BTC, along with the other two types of whales — “lost” and “criminals” — do not have much influence over the market, as many of these wallets have yet to move copious amounts of BTC to exchange platforms.
Still, Chainalysis claimed that even the most active of whales have done little to push prices lower. In fact, the researchers claimed that during late-2017 and the earliest months of 2018, trading whales actually purchased more BTC than what was sold. This indicates that the individuals behind the pseudonymous wallets shouldn’t be blamed for the crypto market’s parabolic move upwards and its subsequent sell-off.
Moreover, crypto whales, which may be institutions, family offices, hedge funds, or crypto billionaires in disguise, likely have migrated to over-the-counter (OTC) markets and darkpools, which facilitate off-book transactions for the wealthiest of clients, over the past 24 months. The rise in popularity of OTC providers, like Circle, only corroborates the fact that whales can’t alter the price of Bitcoin on a whim and that retail investors have finally taken the reins.
While this report lays the Bitcoin whale debate to rest, many are still attributing the market’s most recent plunge to the shadowed individuals who have been blessed with crypto affluence.
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