In a very informative webinar produced by Chainalysis today, the blockchain research firm made the surprising claim that crypto “whales” – individuals with more than $56 million in Bitcoin – pose no serious risk to the price of Bitcoin.
In the presentation titled “Who are Today’s Bitcoin and Bitcoin Cash Whales?,” Chainalysis breaks down the types of whales into several categories including “criminal whales,” “early adopter whales,” and “trading whales.”
One item of interest: Bitcoin Cash whales, on average, hold about 250% of the crypto that regular Bitcoin whales hold. The company defines a BCH whale at about twice the rate they categorize a BTC whale. So, to be a whale by their definition, you must hold at least 15,000 BTC. To be a Bitcoin Cash whale, you must hold at least 30,000 BCH.
Early adopter holdings have dropped from 9% of all Bitcoin in circulation to roughly 5% today. The presenter told viewers that inflation via mining is only part of the reason for this – some whales did sell part of their holdings during bull runs. The company sees this as a sign of health for the crypto economy. They note that “trading whales” have the most positive effect of the whale classes – they provide a “stabilizing effect.”
Trading whales have begun to supplant other types of whales in terms of their holdings. At the end of the webinar, someone asked if trading whales might also be early adopters. The presenter said that while some early adopters had shown signs of trying to accumulate more Bitcoin later on, it generally wasn’t significant enough for them to cross over into the other category.
The semi-opacity of the Bitcoin blockchain means at least some of the addresses studied are probably small groups of traders, rather than individuals. The good news is that the actual threat that all whales pose to the cryptocurrency economy is relatively low. If they sold off their entire holdings, it would be effectively a $3.9 billion sale at current prices. That’s not quite 10% of the current total market capitalization of Bitcoin.
Obviously, a sell-off in that range would have some impact. Bear trading bots would respond, but so would bulls. The net effect on the price of Bitcoin is decidedly low, according to Chainalysis’ research, anyway.
That said, we’ve never seen the true impact of such a sell-off. If strong sell orders of this magnitude were actually put into play, the actual outcome is difficult to determine. One aspect of such a scenario is that new coins would be entering exchanges for the first time.
We know that up to 2.5 million BTC change hands every day on exchanges, but often enough these are the same coins being traded over and over again. Most trading whales sell Bitcoin with the expectation of buying it back cheaper – they increase their holdings, further delineating the risk of other types of whales.
The one group of whales who effectively pose the smallest risk to Bitcoin’s price are criminal whales, or people who’ve made their money from dark net markets. These whales don’t sell in the same way that other whales will, so the existential risk they pose is much lower.
When criminal whales sell, they want to evade detection. Think gift cards and altcoin laundering schemes. They’ve also begun to move to privacy coins over the years. The transparency of the blockchain is not an asset to these types of whales, so they tend not to use it unless necessary.
Last modified: March 4, 2021 3:19 PM