Chainalysis Research: Bitcoin Whales are not Destabilizing Factor in the Market

BTC  USD | Bitfinex

BTC USD | Bitfinex

Chainalysis provides software solutions, namely "Chainalysis Reactor" and "Chainalysis KYT", which are used for investigation and compliance purposes by institutional clients, such as banks and crypto exchanges, as well as governmental bodies from around the world. The Ripple, Ethereum, and Bitcoin prices were stable for the last few weeks, but they have become incredibly volatile this week.

The third group referred to as the "lost whales" account for about 212,000 BTC, an equivalent of $1.3 billion with no transactions occurring on such accounts as far back as 2011 because owners have lost private keys with no means of accessing their accounts.

The second theory was that Bitcoin was somehow moving in-line with traditional capital markets, like the NYSE, Nasdaq, and S&P 500 stock markets.

However, the study by Chainalysis shows these fears to be blown out of proportion.

It has been observed that only the traders, who account for a third of total whale shares are active buyers and sellers. The report also puts forward some interesting facts that while the few amongst them who trade have the ability to influence a deep in the market, they tend to buy, not sell during a price decline.

Investors have always been wary of a market situation where a few whales can exert overwhelming control over the asset price, fuelled in part by reports suggesting that whales deciding to sell large amounts of their BTC holdings have triggered sudden downward price movement.

According to the post, this makes sense since the whales are professionals that have no interest in seeing the market plunge into a loss. When they require liquidity, traders are likely to use OTC trading platforms equipped to manage large transactions with minimal market disruption. Such a conclusion was made by representatives of blockchain start-up Chainalysis after exploring 32 biggest bitcoin wallets accounting for $6,3 billion. Others are apt for deliberate manipulation of a "Whale" that controls 40% of all bitcoins, or just a "sensationalist narrative" of media.

In general, the study suggests that Bitcoin whales are not responsible for market volatility because only a small percentage of those in the trader category actually trade while the other categories either have negligible or no trading history at all. The total market capitalization for cryptocurrencies is down by more than 60% for the year. Namely, whales may actually be stabilizing the market rather than the opposite.

Another group focuses mainly by early adopters and miners consists of 15 investors holding nearly 332,000 coins. Buying and trading cryptocurrencies should be considered a high-risk activity.

Criminal wallets make up the last category in the list, consisting of Silk Road entrepreneurs and money launderers who hold 125,000 BTC, or $750 million, on their now-locked wallets.

As much as five percent of the cryptocurrency's value was lost in a matter of just minutes.

Speaking of bitcoin, Google's early relation with cryptocurrency & bitcoin has been burdened, to say the least.

As the report notes, "that net activity demonstrates that trading whales were not selling off Bitcoin in any mass amount, but rather were net receivers of Bitcoin from exchanges in late 2016 and 2017".

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