Get to know the Bitcoin Whale That Makes the Market Chaotic.

Knowledge Crypto
KnowledgeCrypto
Published in
4 min readAug 17, 2021

Bitcoin whales have always been an interesting discussion because their existence can influence market dynamics; often, the ups and downs of prices are associated with whale activities, whether they are selling or buying.

In this article, you will be invited to know the Bitcoin whales, who they are, and how they trade? Learn more.

Who is the Bitcoin Whale?

That said, Bitcoin whales can be divided into four general groups, including the following:

Exchange
Cryptocurrency exchanges have continued to increase their BTC storage over the years, making them some of the largest centralized Bitcoin owners. They do it to increase their liquidity and allow more trades.

A 2019 analysis by TokenAnalyst found that approximately 6.7% of Bitcoin in circulation is held in exchange wallets. As proof, four of the six largest Bitcoin wallets belong to Binance, Bitfinex, and OKEx.

Institution
This category can be subdivided into other groups, such as not-for-profit companies and funds representing accredited investors. One of the biggest holders of Bitcoin is digital asset manager Grayscale, a subsidiary of the Digital Currency Group.

It oversees $29 billion worth of Bitcoin. This coin is more than 3% of the current market cap. With 654,600 Bitcoins on hand to support investor dollar contributions, Grayscale Bitcoin Trust is the largest Bitcoin fund globally.

Individual
Some prominent individuals bought Bitcoin earlier when the price was much lower than today. The founders of cryptocurrency exchange Gemini, Cameron, and Tyler Winklevoss are believed to have invested $11 million in Bitcoin in 2013 at $141 per coin. That would make their assets total around 78,000 BTC, worth around $3.5 billion today.

Satoshi Nakamoto
Bitcoin’s pseudonymous creator, Satoshi Nakamoto, deserves a category of his own. Leading cryptocurrency researcher Sergio Demian Lerner estimates that Nakamoto may have mined over 1 million BTC between January and July 2009.

Not all whales are known, mostly many are dormant and unknown like Satoshi. Fun fact, 64 of the top 100 addresses have not withdrawn or transferred Bitcoin.

So, you could say that many Bitcoins currently exist only quietly and do not move to any account.

Bitcoin Whales Make Trades

Whales don’t always sit; still, they can trade, and when this happens, there will be movement in the market. This is due to the significant concentration of whale wealth. Large buy or sell orders can affect the market.

Companies want to avoid making bulk purchases, lest they cause prices to rise while they are still buying. For example, the MicroStrategy example is a public company holding 105,000 BTC ($4.7 billion).

MicroStrategy CEO Michael Saylor said the company used a “macro buying strategy” to buy nearly 20,000 Bitcoins in thousands of smaller trades.

According to Saylor, the company “traded continuously for 74 hours, executing 88,617 trades during one purchase.” The company is also on alert and ready to buy anywhere between $30–50 million in assets within seconds if the Bitcoin price drops 1 to 2%.

Where Whales Trade

Whales can use several methods to trade, with each method providing some insight into market conditions. Areas follow:

Over the counter (OTC)
OTC, or off-exchange trading, involves a bilateral contract in which a buyer and seller agree on settling trade in the future. Investment banks usually also engage in direct OTC transactions with their clients for large-scale transactions.

Wallet to Wallet
OTC transactions between whales usually occur in a wallet-to-wallet setup. Because OTC trading relies on privacy and does not require liquidity from the exchange, the effect on market prices is generally not very pronounced. Usually, wallet-to-wallet transactions go unnoticed until they are announced or flagged by a system like Whale Alert.

Wallet to Exchange
Due to the substantial liquidity that many exchanges can provide, wallet-to-exchange transfers (or exchange inflows) are fundamental to the crypto market. On-chain data analytics companies like Glassnode monitor such movements from wallets containing at least 1,000 BTC.

While unusual, inflows from wallets to exchanges or deposits of several hundred million dollars (in BTC) can frighten day traders, create unintentional selling pressure, and negatively affect or cause Bitcoin prices to drop temporarily.

Exchange to Wallet
Because they can provide greater security, whales can store their assets in cold wallets, hardware that is not connected to the internet. Bitcoin outflows from exchanges to cold wallets can result in price appreciation as more BTC is taken out of circulation, fueling demand.

Exchange to Exchange
When whales engage in exchange-to-exchange transactions, it is often for arbitrage, i.e., taking advantage of small price differences across markets.

That’s the explanation about the Bitcoin whale that you need to know.

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Knowledge Crypto
KnowledgeCrypto

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