According to The Telegraph, there are approximately 2400 whale accounts holding about 40% of all existing BTC. Such a high concentration of coins in a small number of wallets is a problem: it can create disturbances in the market, causing great price movements. It also flies in the face of the mantra that Bitcoin is decentralized, with so few controlling such a large portion of the Bitcoin supply.
So how exactly does it work? Let’s imagine the scenario where coins just sit in the wallet of a whale, unmoved. These BTC are practically excluded from day-to-day transactions, so the market narrows down: the liquidity drops, and the demand goes up.
In a different situation, the whale decides to sell a large amount of crypto all at once. Here the volatility increases even more. The coin’s rate, in its turn, may plummet down, as other participants of the market follow the precedent. And lastly, he or she may decide to get rid of a big number of the coins in small portions over time to avoid unnecessary attention. In this case, the market can experience distortions, with the price of the coin fluctuating for no obvious reasons.
Will whales always exist?
The presence of whales on the market is neither good nor bad: it is a fact one needs to consider when making investment decisions around crypto. It’s vital to stay cool, avoid panicking around fire sales and try to take in the bigger picture instead.
For one, right now, during the period of recess, whales are still consistent in buying Bitcoin. Since mid-May, the members of the “rich list” (the cream of the whale society who have over 1000 BTC in their account) have accumulated 80,000 of the now-cheaper Bitcoin – and, let’s be honest, it’s very unlikely they will stop there.
Do you think there is a way to lessen the market impact of the whales? Or should we just relax and take it as it is?