Whales and crypto-industry: big money behind the closed doors that change the industry

Onytrex.com
Dec 3, 2018 · 3 min read

Recently, there has been an increase in media reports, stating that institutional money has entered the cryptocurrency market. However, close inspections of bitcoin’s statistics show that so-called whales prefer to avoid crypto-exchanges. They are much comfortable in the shadows, having OTC trading at their call.

Several crypto-enthusiasts examined the data of Bitinfocharts and stumbled upon a few interesting facts. At the end of October 2018, they found five BTC wallets that in four weeks have received huge amounts of cryptocurrency — from 11,000 to 55,000 BTC, eventually collecting over 133,000 bitcoins. It was equivalent to $ 854 million ($ 532 billion at the current exchange rate). For instance, Binance stores the smaller amount on cold wallets (only 129,000 BTC).

So, who can obtain so many assets? One theory says that institutional investors decided to enter the market prior to SEC decision regarding ETF. Supposedly, such large financial players like JP Morgan, Morgan Stanley, etc. might have started operating with cryptocurrencies through OTC-deals. All this is done in order not to attract unwanted attention from the crypto-community and, likely, destabilize the prices. According to Coinmarketcap, this autumn Bitcoin trading volume was “dancing” around $ 4.5 billion. Compare it to the worth of bitcoins accumulated on those 5 wallets and you will see that this is almost 20% of the market’s volume. Such large numbers surely would not have gone unnoticed on official public exchanges, adding to already existing worries and speculations. It happens quite often that large purchases are accompanied by massive FUD (Fear, Uncertainty, Doubt — a disinformation strategy used in sales, marketing, public relations, politics, cults, and propaganda. It influences people’s perception by disseminating negative and dubious or false information and a manifestation of the appeal to fear) in the news feeds, which is not helpful at all.

Another important aspect that also has contributed to big investors avoiding exchanges is linked with the exchanges’ politics. Most of them place limits on the maximum order size, so large sums have to be divided into several transactions (which is not convenient, indeed). The platforms simply do not have enough liquidity to service such amounts, so they have to make sure that they will always have enough capabilities to satisfy their clients’ needs by restricting them. Moreover, the pricing point is also may be tricky on the exchanges, since the order will not always close at the desired price. After all, the cost can change dramatically right before the conclusion of the transaction, while OTC allows the parties to agree on a fixed price in advance.

It is unquestionable that OTC trading opens up new opportunities for institutional and big investors, but it also has its downsides for smaller traders. Let’s just consider that with such big sums traded outside of the more or less transparent crypto-exchanges the market can be easily manipulated. Therefore, many representatives of the crypto-community speak in favor of transferring the OTC to the open platforms. However, objectively speaking, it is quite impossible for now. Nowadays, some representatives of the crypto-industry are organizing six-digit trading through Skype or Telegram. This is very similar to the old-fashioned brokers and traders of Wall Street, who called sellers and buyers to bring them together. Thus, for some people, the old way is, surprisingly, the good way.


Some crypto-exchanges are trying to get their piece of the “pie”. For instance, in late October, Coinbase announced that it was going to open a special platform for OTC trading. However, when this happens the crypto-exchange does not specify. Following this, Huobi and Hodl Hodl announced similar projects. The time of the launch again was not clarified.

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