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How Bitcoin Whales Move the Prices of Cryptocurrency

Cryptocurrencies are extremely volatile and the behavior of digital assets is strongly influenced by the actions of whales, who are large holders of cryptocurrencies. In the case of bitcoins, a whale is a user who has more than 1000 BTC held in a wallet. 

At the moment there are less than 2500 such users. Since bitcoin addresses are anonymous, it is often difficult to determine who the wallet belongs to. One user can have multiple Bitcoin addresses.

There are several categories of Bitcoin whales that include:

  • Exchanges: Exchanges are among the largest holders of BTC.
  • Institutions and Corporations: One of the largest corporate holders of bitcoin is MicroStrategy with 130,000 BTC. Other publicly traded companies, such as Square and Tesla, also have large bitcoin reserves.
  • States: Bitcoin holders also include states. Some of them purposefully buy and mine bitcoins, others have bitcoin after the large confiscations of BTC from various kinds of criminals and offenders.
  • Individuals: Many whales bought bitcoin at the dawn of its appearance, when its price was much lower than it is now. Cameron and Tyler Winklevoss have over 78,000 BTC, Tim Draper bought 29,656 BTC for $632 BTC at United States Marshals Service auction. Barry Silbert purchased 48,000 BTC at the same auction.
  • Wrapped BTC: Currently, there are more than 236,000 BTC that are wrapped in the ERC-20 Wrapped Bitcoin (wBTC) token and support a 1:1 pegging to Bitcoin.
  • Satoshi Nakamoto: It is believed that Satoshi Nakamoto may be the holder of 1 million BTC, which makes him a multi-billionaire.

A Bloomberg report  states that 2% of accounts controlled more than 95% of bitcoin. It is estimated that 1% of the world's population controls 50% of the world's wealth. This means that wealth inequality is more widespread in Bitcoin than in traditional financial systems.

How whales manipulate Bitcoin prices

One of the most commonly used tactics by whales to manipulate the price of bitcoin is the "sell wall.” The whale puts up a large order to sell a huge amount of its bitcoins and indicates a price lower than other sell orders. 

This causes volatility, which leads to an overall decline in bitcoin prices. Such actions provoke panic and traders start selling off their bitcoin at a lower price. Next, the whale cancels the sell order and buys bitcoins at the most attractive price.

The opposite tactic is called Fear of Missing Out, or the FOMO. By putting up for sale a large number of assets at a higher price, whales provoke traders to raise the price of their orders. 

However, this tactic requires significant capital investment, which is not required to create a "sell wall.”

Due to the fact that the issue of bitcoin is limited by 21 mln BTC, currently in the Bitcoin ecosystem, the trust of whales in BTC is supported by the macroeconomics of inflation.

Data on the whale wallet chain shows that most of them are holders - hodlers. Those whales who recently bought their assets during the last market cycle have not yet managed to get realized profits for sale. 

There is no reason to believe that whales will abandon the bitcoin ship, especially when there is economic fear of an impending recession.

Although, just looking at the on-chain data for the last three months, you can see that the number of whale wallets has decreased by almost 10%, there has been a corresponding increase in the number of wallets owning from 1 BTC to 1000 BTC.

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