Crypto Whale Activity Is Huge In 2021 – Why Are They Buying So Much?

According to recent data from Glassnode, based on cluster heuristic, the whale population has been increasing since 2019, after experiencing a decline from 2016.

In the five years since 2016, Bitcoin held by whales has been on the decline, falling from a high of 6.7 million to 5.2 million. However, since the beginning of 2021, there has been a marked increase in the number of Bitcoin holders becoming whales.

The current estimated number of whales is about 1,800, with less than 100 holding between 10,000-1,00,000 BTC. Bitcoin addresses holding between 100-10,000 BTC hold over 9 million coins combined.

Because of their immense market sizes, whales are prone to make waves whenever they make moves. Their ability to roil the markets has led to the birth of an entirely new industry in the crypto ecosystem dubbed “whale watching“. Here, observers keep a keen eye on whatever movements whales might make and react accordingly.

This year, more than $10 billion worth of crypto was acquired by whales between late June and late August. Whales bought upwards of 100,000 BTC in just six weeks, with around 60,000 BTC bought in just one day. This volume mirrored a similar amount traded earlier in the year in February.

According to data from BitInfoCharts, the ten largest Bitcoin wallets control 6% of all bitcoins currently in circulation, with an estimated value of $50 billion. The top 100 addresses cumulatively hold about 15% of all bitcoins, valued at $124 billion.

Who are Some of These Whales?

Because of the nature of crypto, the vast majority of whales are anonymous. However, a few of the biggest movers are pretty well known.

Social media buffs might be acquainted with the Winklevoss twins, Cameron and Tyler, made famous by the movie “The Social Network.” In 2012 they invested $10 million in Bitcoin, with the cryptocurrency valued at a measly $8 per unit. Since then, the brothers have amassed billions of dollars worth of Bitcoin and NFT. Through their family vehicle, Winklevoss Capital Management, the brothers have invested in more than 20 digital asset startups, including Bitcoin lender Block-Fi and crypto exchange Gemini. The twins have a reputation for being extraordinarily bullish and have stated that Bitcoin will massively outperform traditional stocks and assets in the next decade.

Another well-known whale is venture capitalist Tim Draper. In 2014, the investor bought 29,656 coins that the U.S. government had seized. Over the years, Draper has continued to grow his crypto holdings and has echoed the Winklevoss twins’ sentiments regarding the future value of Bitcoin.

MicroStrategy CEO Michael Saylor is perhaps the most recognizable whale right now. Regarded as cryptocurrency’s foremost proponent, Saylor not only owns thousands of coins himself but has also made Bitcoin investing a primary function of MicroStrategy. The company currently holds slightly over 114,000 bitcoins valued at more than $3 billion.

Why Whales are Exhibiting a Voracious Appetite for Crypto

Michael Saylor, Tim Draper, and the Winklevoss twins share one common belief: Bitcoin’s value will eventually hit the hundreds of thousands. Even among institutional investors, there is quiet optimism that Bitcoin will hit the $1 million mark one day. This faith in Bitcoin’s future increase in value is one of the reasons why whales are stocking up on crypto.

Exchanges have also played a role in the recent bull run by whales. They are the largest centralized cryptocurrency owners, and they have been buying more coins to increase their liquidity and encourage more trading.

A recent analysis shows that exchange wallets hold 6.7% of Bitcoin and are growing. The biggest wallets belong to the likes of Binance, BitFinex and OKEx.

Another reason for the increase in whale activity could be that wealthy organizations and individuals have been withdrawing their Bitcoin loot from exchanges after the events of Black Thursday. Slightly over one year ago, the value of crypto assets dropped by between 30% to 60% a day after the WHO declared COVID a global pandemic. Bitcoin alone lost 40% of its value, dropping from $7,969 to $4,776. Since then, there has been a marked decrease in the Bitcoin balances of the exchanges, coinciding with a substantial increase in the Bitcoin balances of whale wallets.

The proliferation of institutional investors in the Central, Northern and Western Europe (CNWE) DeFi space could also explain the recent increase in whale activity. According to blockchain data platform, Chainalysis, institutional investors in decentralized finance are creating the world’s largest crypto economy in CNWE. In just the last 12 months, crypto transactions in the region grew from $1.4 billion to a whopping $46.3 billion, especially on DeFi protocols.

Whales Manipulating the Market

Finally, we must address the elephant in the room – market manipulation. As stated earlier, due to the size of their holdings, any moves whales make in the market, whether buying or selling, tend to have ripple effects. Some whales have mastered the art of taking advantage of these ripples, and some of the whale activity might result from attempts to manipulate the market. In a move known as the sell wall, whales put massive sell orders lower than other sell positions in the market, thus creating volatility. Following this volatility, prices fall, triggering a chain reaction. Stability usually returns when whales pull their sell orders off the market or generate enough panic selling to land their desired price and, in the process, accumulate additional crypto.

Whales also employ the reverse sell wall, where they buy unrealistic levels of cryptocurrency at markedly higher prices to inflate the price of a coin. This artificial inflation then forces bidders to raise the price of their bids; hence, the sell orders fill their buy orders. If this method is well-executed, smaller retail investors often get caught in a state of FOMO (Fear of Missing Out) and end up deploying vast amounts of capital.

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