Who are Bitcoin whales and how do they trade?

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  • Bitcoin whales contain large volumes of BTC.
  • 10 largest BTC wallets control 6% of Bitcoin.
  • When whales buy, sell, or simply move resources, they can create ripples in the markets.

While digital assets theoretically help facilitate a level playing field for people, in distributed networks like Bitcoin, some people have more power and influence than others: whales.

Bitcoin whales are people or entities that have enough Bitcoin to influence or even manipulate the value of the currency. greater the price movement, the bigger the whale.

According to data from BitInfoCharts, the 10 largest BTC wallets control 6% of all Bitcoin in circulation, which accounts for around $ 50 billion, while the top 100 wallets contain almost 15% of all Bitcoin ($ 124 billion). .

To fully understand Bitcoin price movements, it is important to know who these Bitcoin whales are and how they work.

Who are some of these whales?

Bitcoin addresses give users some anonymity. refore, decoding the identities of influential portfolios, while not impossible, is not always easy. With that said, Bitcoin whales can be divided into four general groups:

  • Exchanges: Cryptocurrency exchanges have steadily increased their BTC stores over the years, making them some of the largest centralized owners of Bitcoin. y do this to increase their liquidity and allow more trading. A 2019 TokenAnalyst analysis found that around 6.7% of Bitcoin in circulation was held in exchange wallets. As proof, four of the six largest Bitcoin wallets belong to Binance, Bitfinex, and OKEx.
  • Institutions: This category can be divided into other groups, such as for-profit corporations and funds representing accredited investors. One of the largest holders of Bitcoin is the digital asset manager Grayscale , a branch of the Digital Currency Group. It oversees $ 29 billion in Bitcoin, more than 3% of the current market capitalization. With 654,600 Bitcoins available to support investors’ dollar contributions, the Grayscale Bitcoin Trust is the largest Bitcoin fund in the world.
  • Individuals: Several notable people bought Bitcoin early, when the price was much lower than today. founders of the Gemini cryptocurrency exchange, Cameron and Tyler Winklevoss, are believed to have invested $ 11 million in Bitcoin in 2013 at $ 141 per coin. That would make its assets, around 78,000 BTC, worth around $ 3.5 billion today. American venture capitalist Tim Draper bought 29,656 coins for $ 632 each at the US Marshal’s services auction. His treasure is worth more than a billion dollars. founder and CEO of Digital Currency Group, Barry Silbert, participated in the same auction and acquired 48,000 Bitcoins, now valued at $ 2 billion.
  • Satoshi Nakamoto: creator of the Bitcoin pseudonym Satoshi Nakamoto deserves his status. Leading cryptocurrency researcher Sergio Demian Lerner has estimated that Nakamoto may have mined over 1 million BTC between January and July 2009. Although there is no single wallet that holds 1 million BTC, using Lerner’s research we can see that from the first roughly 1.8 million BTCs created for the first time, 63% has ever been spent. If Nakamoto were really sitting on all these coins, his fortune would be worth more than $ 40 billion.

However, not all whales are known. And most, like Satoshi, are inactive. In fact, 64 of the top 100 addresses have yet to withdraw or transfer Bitcoins, including a cool Binance Wallet with 288,126 BTC ($ 13 billion).

When a whale splashes

But what happens when they trade?

Given the significant concentration of wealth in whales, large buy or sell orders can cause a ripple effect. This is something that companies want to avoid when making large purchases, so as not to drive up the price while they are still shopping. Take MicroStrategy, for example, a public company that owns 105,000 BTC ($ 4.7 billion).

MicroStrategy CEO Michael Saylor he said the company used a “macro buying strategy” in which it bought about 20,000 Bitcoins in thousands of smaller transactions. According to Saylor, during a purchase, the company “traded 74 uninterrupted hours, executing 88,617 transactions.” Despite the deliberately small transactions, the company was ready to buy $ 30-50 million worth of assets in seconds if the price of Bitcoin fell 1-2%.

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While large buy orders can drive the price up quickly, large sell orders do, well, the opposite. If sellers are looking to convert their BTC holdings into cash or altcoins, a lack of liquidity coupled with larger transactions can create downward pressure on the price of Bitcoin. This can lead to a sell-off as retail investors panic and do the same.

How exactly do whales behave?

Whales can use a variety of trading methods, each of which provides information on market conditions.

  • Over-the-Counter (OTC): OTC, or over-the-counter trading, involves a bilateral contract in which a buyer and a seller agree on how to settle a future transaction. Investment banks also often enter into OTC deals directly with their clients for large-scale transactions. Several centralized exchanges, such as Huobi and Binance, offer OTC desktops to connect high-net-worth buyers and sellers based on their preferred terms (e.g., price, volume, etc.). However, these agreements are inherently private; Participants in OTC transactions are subject to non-disclosure and non-circumvention agreements.
  • Wallet to Wallet: OTC transactions between whales generally occur in a wallet-to-wallet configuration. Since OTC trading relies on privacy and does not require liquidity from exchanges, the effects on market prices are generally not that important. Wallet-to-wallet transactions generally do not receive any attention until they have been publicly announced or flagged by systems like Whale Alert. y generally have a negligible impact on prices in the short term, as the reason for the movement of funds is often unclear.
  • Wallet to trade: Due to the substantial liquidity that many exchanges can provide, wallet-to-exchange transfers (or exchange entries) are a key part of the cryptocurrency markets. Any transfer of Bitcoin from a whale to a known exchange wallet generally coincides with the intention to sell or trade. Chain analysis companies like Glassnode track such movements from wallets containing at least 1000 BTC. While not typical, a multi-hundred million dollar (in BTC) wallet-to-exchange entry or deposit could scare off daily traders, create unintended selling pressure, and therefore negatively affect or cause a temporary drop in Bitcoin prices.
  • Wallet trading: Because they can provide greater security, whales can store their assets in cold wallets, hardware devices that are not connected to the internet. Bitcoin’s exits from exchanges to cold wallets can lead to a price appreciation as more BTC is removed from circulation, fueling demand. However, if a large stablecoin exit shifts from exchanges to wallets, it could indicate that whales view market conditions as unfavorable or volatile and prefer a more reliable short-term alternative.
  • Exchange for exchange: When whales do exchange transactions, it is often through arbitrage, that is, taking advantage of small price differences between markets. Slight changes in the price of Bitcoin generally do not motivate daily traders, but since the whales control much higher volumes, they can earn considerable returns.

Due to the loosely regulated nature of cryptocurrency markets, sweet whales use large buy / sell orders to manipulate market sentiment, for example creating large and unrealistic sell orders to keep prices artificially low or creating large orders. purchase to temporarily inflate the price.

However, despite sporadic price swings or short-term market movements caused by whales, as adoption and maturity increase in the global cryptocurrency market and price rises, Bitcoin will continue to ignore the long-term influence of whales.

Post sponsored by Saidler & Co.

This sponsored post was created by Decrypt Studio. Learn more about collaborating with Decrypt Studio.

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