Since it came to public attention, bitcoin has made as much news for the volatility in its prices as for its scandals. Thin liquidity volumes in bitcoin markets mean that it’s prices can be easily manipulated through large trades. Market players responsible for these large trades are known as bitcoin whales because they hold large stashes of the cryptocurrency. They have been blamed for the large swings in bitcoin’s price.
But a post published recently by research firm Chainalysis suggests that bitcoin whales may not be the cause of its volatility. According to the post, bitcoin whales control only 6% of bitcoin’s overall supply in the markets. What’s more, their trading activity seems to indicate that they are long-term holders of bitcoin as opposed to those focused on maximizing short-term returns through frequent trades. They buy on the dip and usually hold onto the coins.
Through analysis of blockchain addresses, Chainalysis found that thirty-two of the largest bitcoin whales together hold 1 million bitcoins. The post also sheds light on the types of whales within the bitcoin ecosystem. With holdings worth $2.1 billion, traders account for slightly more than a third of all bitcoin whales. That amount is distributed between nine wallets on bitcoin’s blockchain.
Given the relative novelty of the crypto-universe, it is no surprise that most bitcoin whales entered cryptocurrency markets less than a decade ago. Bitcoin miners and early adopters, who got into the game early, also hold an equal amount worth of bitcoin but their total is aggregated between 15 wallets. Lost wallets or wallets whose private key has been misplaced or whose identity is not known own bitcoin worth $1.3 billion or approximately 21.2% of all bitcoin currently available. While bitcoin (and cryptocurrencies in general) have become synonymous with illegal activity, criminals comprise the smallest of bitcoin wallets. They own three bitcoin wallets – two of them are connected to infamous Silk Road market and have 125,000 coins worth $790 million in asset value.
Large trading activity has often been blamed for volatility in bitcoin prices. Chainalysis had earlier analyzed bitcoin’s steep slide within three days in August and found 50 transactions that involved a total of 50,500 bitcoins had been moved between August 23 and August 30.
However, as Fortune magazine points out, Chainalysis’s research does not include the most famous of bitcoin whales – its inventor Satoshi Nakamoto. He is reported to own approximately one million bitcoins. But he disappeared after introducing the cryptocurrency to the world and, for all practical purposes, his bitcoin holdings are considered to be lost. If the Chainalysis research excludes Nakamoto’s stash of bitcoin, then the overall holdings of bitcoin whales are reduced to 4.6% of the current 17 million bitcoin circulating in trading markets.