Bitcoin Whales Are on the Verge of Extinction: Crypto Watchdog

November 6, 2019 17:05 UTC
  • So-called “bitcoin whales” appear to have a considerable influence on the cryptocurrency market, according to a new report.
  • At the same time, whales are a dying breed.
  • The founder of crypto watchdog Whale Alert explains why.

It’s fair to say that bitcoin whales have a reputation for running the show when it comes to the crypto markets. Whether this is an accurate account of the role whales actually play within the ecosystem remains an open question.

With his eyes trained on every major transaction in the market, Whale Alert co-founder and CEO, Frank (who prefers not to use his last name), analyzed how bitcoin’s price flux may actually connect to these large transfers.

He disclosed his findings in a new interview with SFOX.

How Whales Move the Bitcoin Market

Research suggests that large-scale traders have triggered sizeable shifts in the crypto market, at least on some occasions. | Source: TradingView

You don’t have to look far into the past to find evidence that these large-scale crypto traders are influencing the market.

Last month, the bitcoin price slid below $7,000, only to rally 60% to retake the $10,000 handle. While bitcoin’s predilection towards the volatile is well-documented, Whale Alert tracked several transactions that appeared related to the movement – giving credence to the notion of market manipulation.

Another instance occurring in 2018 between August 29th and September 6th witnessed one whale offload approximately $1 billion in BTC. Whale Alert caught the monolithic transaction heading from a wallet to a cryptocurrency exchange. Surely enough, a few days following the transfer, bitcoin exhibited a 15% drop, along with an increase to its 30-day rolling volatility.

A single whale offloaded around $1 billion worth of BTC in 2018. | Source: SFOX

Of course, the fact that these two instances occurred in a timely fashion doesn’t instantly provide evidence of causation. However, for Whale Alert, it’s enough proof to speculate on:

“Whale transactions can have a really profound effect on price in the market. […] Knowing where the currency flows is a great way of predicting stuff.”

Gauging Tether’s Impact on the Bitcoin Price

Crypto whales, as they so often do, became headline news within the community this week.

A sensationalized Bloomberg article on a year-old research report concluded that a single whale was responsible for the infamous 2017 bitcoin run. The report concluded that unbacked USDT, printed at will, had been used to pump BTC whenever it fell below a certain threshold, a relatively unfounded theory, which has circulated around the crypto space for many years.

The report was mostly debunked by Crypto Twitter’s finest. The overarching consensus remains that retail speculation drove bitcoin’s 2017 run and that the Tether-bitcoin connection is purely coincidental.

Nonetheless, according to the analyst, USDT may have had a significant role within bitcoin’s 2019 rise — but not as you might expect. During the first few months of this year, the amount of USDT issuances were tremendous. This played perfectly into the psychology of the market.

“A lot of people see those as a positive market development: they assume those USDT are going to be used to buy BTC. Now, I don’t know if that assumption is correct, but a lot of people reacted to that, I think—to the issuance of Tether.”

Analyst: Whales May Become a Thing of the Past

It won’t be long before you can no longer blame every single price crash on bitcoin whales. | Source: charnsitr/Shutterstock.com

Interestingly, Frank doesn’t see bitcoin whales evolving with the space, but instead, disappearing altogether. He reasoned that the extinction of these leviathan hoarders was inevitable.

“Bitcoin started with a few people. So the biggest chunk of the coins is going to be in the hands of the people who started it.”

Still, it appears inevitable that as the industry progresses, and as an economic pressure to sell emerges, more and more whales will capitulate.

“Eventually, those people will have to sell their coins, and more people are interested—more people are buying—and so, eventually, the distribution of BTC is going to hopefully level out a bit more, and there’s going to be, hopefully, fewer whales.”

Regardless, he isn’t fearing for his livelihood just yet. Whale Alert is continuing to develop, building a new analytics system to track the remaining cryptocurrency whales until their last days.

We’re going to include a lot more blockchains. Right now, we’re tracking eleven blockchains, and, unfortunately, we’re not doing Litecoin yet, we’re not doing Bitcoin Cash yet, we’re not doing Cardano yet… the new system will allow us to easily include them as well […] We’re going to be able to collect data from the first moment, from the first block, for every chain, and start analyzing from there, both forward and backward.”

So watch out, whales; the hunt is only just beginning.

This article was edited by Josiah Wilmoth.

Last modified: November 6, 2019 19:34 UTC

@wjheasman

Will is a freelance journalist based in London, UK. He has been involved in the cryptocurrency industry for over 3 years, and fully believes in its capacity to change the world. Follow him on Twitter at wjheasman. Tips and PR: wjheasman@gmail.com