How Bitcoin whales make a splash in markets and move prices

The names of cryptocurrency whales are derived from the enormous mammals that swim around the oceans of the Earth’s oceans. They refer to individuals and entities who hold large amounts cryptocurrency.

If someone has more than 1,000 Bitcoins (BTC), they can be called a whale. There are only 2,500 Bitcoin addresses. It is difficult to determine who has a Bitcoin wallet because Bitcoin addresses are pseudonymous.

Although many people associate the term “whale”, with early Bitcoin adopters, there are actually different types of whales. There are many different types:

Exchanges: Crypto exchanges are now some of the largest whale wallets, as they have large order books and hold large amounts crypto.

Institutions and corporations: MicroStrategy, a software company, now holds over 130,000 BTC under CEO Michael Saylor. Square and Tesla, both publicly traded companies, have also purchased large amounts of Bitcoin. To increase their cash reserves, countries like El Salvador have also bought large amounts of Bitcoin. Greyscale, a custodian who holds Bitcoins for large investors, is one example.

Individuals: Bitcoin was cheaper than it is today when many whales purchased it early. Cameron and Tyler Winklevoss were the founders of crypto exchange Gemini. They invested $11 million in Bitcoin in 2013, buying more than 78,000 BTC at $141 per coin. American venture capitalist Tim Draper purchased 29,656 BTC for $632 each at an auction by the United States Marshal’s Service. Barry Silbert, CEO of Digital Currency Group, attended the auction and bought 48,000 BTC.

Wrapped Bitcoin: At the moment, more than 236,000 BTC are wrapped in Wrapped Bitcoin (wBTC), ERC-20 token. These wBTCs are mainly kept by custodians that maintain the 1:1 bitcoin peg.

Satoshi Nakamoto, the mysterious creator of Bitcoin, deserves a separate category. Satoshi could have more than 1 million BTC. Satoshi is a multi-billionaire despite the fact that there isn’t a single wallet with 1 million BTC. However, on-chain data has shown that 63% of the initial 1.8 million BTC created have not been spent.

The decentralized world is characterized by centralization

Critics of crypto ecosystem claim that whales make the space more centralized than traditional financial markets. Bloomberg reported that 95% of Bitcoin was owned by 2% of the accounts. According to estimates, 50% of global wealth is controlled by the top 1%. This means that Bitcoin’s inequality of wealth is greater than traditional financial systems. It also contradicts the idea that Bitcoin could potentially disrupt centralized hegemonies.

The possibility of the cryptocurrency market being easily manipulated by the centralization charge in the Bitcoin ecosystem can have dire consequences.

Glassnode’s insights show that these numbers are exaggerated, and they don’t consider the nature of addresses. While there may be some centralization, this could be due to free markets. This centralization will occur, especially when there are no regulations on the market and certain whales trust Bitcoin more than average retail investors.

The “sell wall”

Sometimes, whales place huge orders to sell large amounts of their Bitcoin. They keep the price lower than any other sell orders. This causes volatility and a general decrease in real-time Bitcoin prices. The chain reaction is where panic sets in and people sell their Bitcoin for a lower price.

BTC’s price will stabilize only if the whale pulls large sell orders. Now the price is at the desired level for the whales to accumulate more coins at the desired price. This tactic is called a “sellwall”.

This tactic’s opposite is called the Fear of Missing Out (or FOMO) tactic. Whales place enormous buy pressure on the market, causing bidders to increase their prices in order to sell their orders and fulfill their buy orders. This tactic requires substantial capital, which isn’t necessary to create a sell wall.

Sometimes, price movements can be reflected in the buying and selling patterns of whales. Whalemap is a website that tracks every metric of whales. Twitter handles such as Whale Alert are also available. They allow users to keep up to date on whale movements around the globe via a guide called Whale Alert.

A whale splashes when it’s moving.

Sixty-four percent of the top 100 addresses have not yet transferred or withdrawn any Bitcoin. This shows that the largest whales may be the biggest hodlers within the ecosystem.

This graph shows that whales are profitable in large part. If you take a 30-day moving mean, the graph shows that whales have been profitable for more than 70% of the decade. Their trust in Bitcoin is what fuels the price action. Their faith in the hodl strategy is strengthened by being profitable (month-on month in this instance).

Even though 2022 was one of the worst years for Bitcoin in history, exchange balances have fallen, indicating that many HODLers are buying more Bitcoin. Many seasoned crypto investors don’t keep their long-term Bitcoin investments on exchanges. Instead, they use cold wallets to hodl.

Cointelegraph spoke with Kabir Seth who is the founder of Speedbox, and an avid Bitcoin investor.

“Most whales have witnessed multiple market cycles of Bitcoin and have the patience to wait until the next one. The macroeconomics of inflation, and more recently the correlation with stock markets, have strengthened the belief of whales in the Bitcoin ecosystem. Whale wallets’ on-chain data shows that the majority of them are hodlers. These whales have not made any real profits and are not selling. It is not possible to imagine that the Bitcoin ship will be abandoned by whales, especially with an economic fear of a recession.

The graph below shows Kabir’s points on macroeconomics, and the correlation with the stock markets. It can be seen that Bitcoin has closely followed traditional investments assets since the beginning of the 2018 market cycle.

This trend has a silver lining: Bitcoin is now mainstream in terms consumer sentiment and has lost its status as a peripheral asset. However, a 0.6 Pearson correlation to the S&P 500 does not mean that Bitcoin is a hedge against traditional markets. This trend is also being criticized by other experts in the crypto ecosystem.

It is irritating that there is a correlation between stock markets and the stock market.
— Michael van de Poppe (@CryptoMichNL) June 7, 2022

The correlation between stocks and Bitcoin may be due to broader macroeconomics. Inflows to stock markets have been unprecedented in the past few years. The theory is that the correlation with stock markets might be broken in a prolonged bear market or financial disasters.

What does it mean for a whale to sell?

However, a quick look at the on-chain data over the last three months shows that there has been a decrease in whale wallets by almost 10%. There has been an increase in wallets with 1 BTC to 1000 BTC. The whales are reducing their risk and larger retail investors have been increasing their liquidity, which in turn has provided liquidity for the whales. This historical trend indicates that when this happens, there will be a temporary decrease in Bitcoin prices. This will eventually lead to whales aggressively accumulating more.

Seth answered a question about the recent whale sale-off.

“It is almost certain that the Whales will begin selling within a few weeks. This is how market movements work. The current market sentiment for Bitcoin is that the Bottom has in. Sentiment analysis tools can confirm this. This could be because whales are playing against the trend and creating panic in markets. Bitcoin prices could plummet if there is a significant sell-off right now. This will happen because the retail support has broken. Only whales will be able to accumulate liquidity.

The market can learn from Kabir and the whales that Bitcoin’s future is where it should be. The sentiments and prices can be affected locally. But, the end result will be that hodlers prevail over all.

2021's Most Anticipated Growth & Wealth-Building Opportunity

Join Thousands of Early Adopters Just Like You Who Want to Grow Capital and Truly Understand Cryptocurrency Together

Eileen Wilson

Eileen Wilson –Technology and Energy My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of topmagazinewire.com with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.

Close Bitnami banner
Bitnami