Thar She Blows!: Bitcoin Whales and What That Means for the Market
Recent news of a significant $400M Bitcoin investor near the bottom of the recent price dip has many speculating that this was one of the primary factors that helped with the price reversal. But just how much influence does a buy like this have on the market? Turns out, quite a bit.
As the interest of many was not piqued toward Bitcoin until years after its implementation, it's not hard to believe that both early-adopters and wealthy investors own large quantities of Bitcoin. According to www.investinblockchain.com, 4% of Bitcoin addresses owned nearly 97% of available coins. This gives a tremendous amount of power to those owning the majority of Bitcoin (referred to as a whale) and would allow a "whale" to potentially manipulate the market, whether out of necessity or in a nefarious nature.
Some tactics for a potential market manipulation are suing OTC Markets and Dark Pools, Spoofing and Rinse and Repeat.
In 2014, just such an event happened. A Bitcoin holder known as "Bearwhale" (which is depicted in the artist's image above), sold 30,000 BTC at less than the market value. Many felt this would deflate the market, however this dump of coins was quickly purchased up by other Bitcoin investors, and actually raised the value of Bitcoin. This method of "Rinse and Repeat" is usually intended to create panic, mass sell-offs and then the whale "eats up" (buys at a discount) the available coins at the lower-than-market value.
OTC Markets and Dark Pools are non-mainstream markets where a whale can buy or sell large amounts of Bitcoin, without causing a stir in the market.
Spoofing occurs when a large buy or sell order is seemingly placed (without ever actually completing) below the value of other orders. This leads others to believe a big deal is about to go down in an attempt to shift the market.
While there is currently no evidence supporting any current collusion amongst the whales, a new type, a Wall-Street type of "killer whale" may be on the prowl. Differing from other whales, it may not be in their vested interest to keep the value of Bitcoin at high value, as it may conflict with their own financial leanings. For a more detailed insight on this topic, and some idea who these whales are, please click through the link.