By According to Bloomberg, the 15% plunge in bitcoin’s value during August 2018 was rumored to have been fueled by a mysterious $2 billion bitcoin whale that single-handedly triggered the massive selloff. The abrupt decline in value and talk of outsized bitcoin holders having the ability to dramatically influence the market caused concern amongst investors and prompted an investigation by Chainalysis Inc. Chainalysis is reported to have found, following an investigation of the 32 largest bitcoin wallets, that there were 4 distinct types of whales that had the potential to impact the market.
The Whales of Bitcoin
According to Chainalysis, the smallest group of bitcoin whales consists of 3 individual wallets amassing over 125,000 coins and collectively worth approximately $790 million. These whales are thought to be involved in illicit activities in that one of the wallet holders is connected to money laundering and the other two wallet holders were involved with the Silk Road darknet market. Although any one of these wallets could have had the potential to trigger a massive price move in the market, it appears that they were not responsible for the recent selloff as they have remained stable in their holding patterns in recent years.
The second smallest group of whales was discovered to be the lost whales, holding over 212,000 coins and worth a staggering $1.3 billion. Unfortunately, as the owners of these wallets lost their private keys, they are no longer able to access their wealth of bitcoin. The result is that this pod of whales could not, even if it wanted to, influence the market as there have been no transactions from these wallets for over 7 years, not since 2011.
The second largest whale group was made up of the miners and early adopters of bitcoin. These trend setters are thought to have entered the bitcoin market during its infancy, with 15 wallets holding a total of 332,000 coins equating to just over $2 billion. Much like the criminal whales, the trading volume for the miner whales is extremely low as these investors appeared to have amassed extreme wealth and used the price highs in 2016 and 2017 to cash in some of their bitcoin.
The final group of whales was discovered to be traders and are similar in coins and wallet value to the miner group. These whales were identified to be the largest group in that 9 wallets control the 332,000 coins worth just over $2 billion. These whales were found to be unlike the miners however in that they are recent arrivals to the bitcoin scene, most having only entered the market in 2017.
As these trader whales represent approximately one-third of the total whale assets and as they are thought to be active traders, one would presume that it is this class of whale that is exacerbating market volatility, however, Chainalysis has found otherwise.
Harpooning Not-So-Killer Whales
Of these whales which represent roughly $1 million bitcoins or $6.3 billion dollars, not a single whale was responsible for the recent market decline. The data has, surprisingly, shown that during the major price declines of December 2017 and in the majority of 2018, trading whales were purchasing bitcoin. By buying bitcoin when the price declined, trading whales were not only looking to make a long-term profit but were inadvertently stabilizing the market.
Although the object of fascination for investors, these whales have, according to Chainalysis, “less of an impact on market prices than many people believe”.
Do you believe the bitcoin whales are harmless? Or will they someday strike? Give us your thoughts in the comments below.
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