How to Measure Whether or Not Crypto Whales Pose a Serious Threat to Bitcoin (BTC) Price

In a webinar by Chainalysis, there was a presentation “Who are Today’s Bitcoin and Bitcoin Cash Whales?,” which spoke in lengths about crypto whales, especially related to Bitcoin and Bitcoin Cash.

The term “whale” is frequently used to describe the big money Bitcoin players that show their hand in the Bitcoin market. The ocean as a metaphor for the market is apt since one can then extend it to include the big fish and the small fish; sharks; rallies as feeding frenzies; waves as market moves; and so forth. It may be, however, that the term “whale” has been applied to the wrong class of investor because the players described below are truly the biggest creatures in the ocean.

About 40 percent of bitcoin is held by perhaps 1,000 users; at current prices, each may want to sell about half of his or her holdings. What’s more, the whales can coordinate their moves or preview them to a select few.

Many of the large owners have known one another for years and stuck by bitcoin through the early days when it was derided, and they can potentially band together to tank or prop up the market.

Dear noobs,
Bitcoin is NOT naturally going down. It is being pushed down via whales placing spoofy sell orders on exchanges to make noobs and risk managers sell to "buy back lower". They are stealing your bags and will make you buy back at a higher price.

Retweet this.

— moon (@MoonOverlord) March 6, 2019

They broke the categories of whales into “criminal whales,” “early adopter whales,” and

“trading whales.”

When it comes to Bitcoin, the early adopter whales have reduced in number, from 9% to 5%. Chainalysis uncovered a handful of wallets dating back to the early days of bitcoin. These are early-adopters and miners that amassed a large wallet when bitcoin was in its infancy. Trading activity is “extremely low” among this group, however, a fair number appeared to “cash out” during the bull runs of 2016 and 2017, making a fortune in the process.

Criminal whales pose the lowest threat to manipulation of bitcoin price. Of the 32 largest bitcoin wallets, three have been linked to criminal activity. Those three wallets contain 125,000 coins, worth $800,000,000 at today’s prices. Two of the wallets are linked to the infamous Silk Road black marketplace, where users could buy drugs and weapons with bitcoin. Chainalysis concludes that the third wallet was involved in money laundering.

The presentation notes that 9 of the 32 largest whales were actively buying and selling in the last year or so. They could be individuals or institutional crypto hedge funds. As for their activity, these holders were generally

“buying the dips.”

In other words, they were waiting for bitcoin to decline before buying more. However, even selloffs of this magnitude are pretty harmless when you consider the entire market capitalization of Bitcoin. For smaller altcoins, the story might be a little different.