Bitcoin Whales May Be Stabilizing, Rather Than Destabilizing, The Market – Study

News | October 11, 2018 By:

Bitcoin whales, investors that own a significant number of bitcoins, are not responsible for price volatility, according to a new study by blockchain research firm Chainalysis.

Bitcoin whales are most commonly early bitcoin adopters who are sitting on millions in cryptocurrency. Earlier this year, it was reported that only around 1,000 people own 40 percent of all existing bitcoin. Bitcoin whales have been demonized by the crypto community as culprits of major price drops and market manipulation.

However, Chainalysis’ recent study reveals that bitcoin whales are a diverse group, and only about a third of them are active traders. The study said that “while these trading whales certainly have the capability of executing transactions large enough to move the market, they have, on net, traded against the herd, buying on price declines.”

In the course of the study, Chainalysis examined the transactional history of the 32 largest bitcoin wallets, which represent roughly one million bitcoins ($6.3B USD), to develop a taxonomy of whales. The firm classified the wallets into four categories, such as traders, whales who regularly engage with exchanges to buy and sell bitcoin; miners/early adopters, whales that entered the market much earlier; lost, wallets where the owner has lost their private keys; and criminals, the smallest segment among whales with three wallets, two of which are connected with the Silk Road darknet market and money laundering.

According to the study, traders control over 332,000 coins, worth just over $2 billion. These whales, who are relatively recent arrivals in the bitcoin space, make up the largest category, but only about a third of total whale holdings. The study found that trading whales were not selling off bitcoin in any mass amount, but rather were net receivers of bitcoin from exchanges in late 2016 and 2017.

“This indicates that trading whales were, in aggregate, buying on declines and, consequently, were a stabilizing, rather than destabilizing factor in the market,” the firm said.

Early adopters/miners, holding a total of 332,000 coins ($2B USD), and criminals, who control over 125,000 coins ($790M USD), have been in a holding pattern in recent years. While lost bitcoin whales have, by definition, been inactive since 2011.

“Our research suggests that while bitcoin whales may be big and somewhat mysterious, they have less of an impact on market prices than many people believe,” the firm said.