Will Whales Dump Bitcoin At Peak?
Yes, only if they are dumb!
“Dumping At Peak” Scenario
Bitcoin whales are a few people who own a majority of Bitcoin. Let’s consider the following simple scenario to understand their situation at Bitcoin’s price peak. Note this scenario has nothing to do with my forecast on Bitcoin price.
Suppose Bitcoin price goes up to $20,000 by the end of this year. Bitcoin whales believe Bitcoin is at its peak and then Bitcoin price will gradually decline to and stay at $14,000 forever. However, if all whales dump Bitcoin at the peak, all other Bitcoin enthusiasts and speculators will soon give up on Bitcoin and its price will plummet to practically zero. In this scenario dumping Bitcoin at peak plays the same role as spreading false rumors to trigger a bank run.
In reality, Bitcoin market is not deep enough to absorb all selling orders from the whales before a significant price drop. Yet, the scenario can be simply rewritten so that the peak price is $80,000 and the whales can manage to dump all Bitcoin at $20,000 on average. Most of all, I am not trying to talk about anything related to market depth or liquidity of Bitcoin. I am not even talking about Bitcoin. I am talking, instead, about the world Bitcoin created.
If Bitcoin Dies, So Will The Bitcoin Industry
Not dumping Bitcoin at the peak is not a philanthropic act. It’s simple math. If all Bitcoin whales dump Bitcoin at the peak, they can still earn significant capital gains. However, they will lose the entire Bitcoin industry they have invested and any potential growth opportunities, let alone their reputations. Bitcoin is not just a new currency or gold alternative. It is a beacon and hostage of all Bitcoin-related businesses. If Bitcoin dies, the whales will lose their shares in gigantic mining facilities, lucrative exchanges, and numerous start-ups providing payment and wallet services with 15,665 Bitcoin-related patents (as of 7/15/2019). The whales will no longer be able to control or influence the Bitcoin community, and the whole Bitcoin social capital will be shattered.
Some Bitcoin whales apparently don’t understand what they could have and will still dump Bitcoin. Yet I believe the majority of the whales had a vision on Bitcoin and how it would change the world earlier than anyone else. Starting or investing in Bitcoin-related businesses must have been a no-brainer for them. Why not if they strongly believe in Bitcoin? Most of the whales will not abandon their treasure for immediate capital gains.
Is Bitcoin Another Gold Rush Story?
We all know in California Gold Rush most of the miners didn’t make a fortune except a few early miners. Instead, those who provided food, supplies, and services for miners built wealth. The real lesson from Gold Rush is, however, if you are one of the savvy providers, you want to make newly coming miners keep believing there is plenty of precious gold left. Likewise, Bitcoin whales will make other small miners, users, and speculators continue to believe Bitcoin has a real value. (I am not saying Bitcoin whales are either lying or not lying about Bitcoin at books, online articles, social media, and conferences.) Dumping Bitcoin at the peak is, therefore, the last thing they will do for their profits. Even in the worst-case scenario, delaying the Bitcoin doomsday can be more profitable than dumping Bitcoin immediately. Who knows? Bitcoin might survive the US dollar even if it eventually dies.
Caution! My Story Has A Flip Side
Bitcoin whales will not dump Bitcoin anyway whether they believe Bitcoin price is at peak or not. It sounds like good news to Bitcoin investors. The flip side is, however, even if whales collect more Bitcoin whenever there is a dip, their shopping spree does not necessarily mean they believe Bitcoin price will go up. They are probably doing it either to make us keep believing Bitcoin will survive or keep us from believing Bitcoin will wither. What whales are doing is, thus, not really informative.
Conclusion
Most of Bitcoin whales probably have a great share of Bitcoin-related businesses and Bitcoin social capital. Losing them because of complete Bitcoin meltdown can be more financially painful to the whales than missing an opportunity for selling their Bitcoin at peak. Bitcoin whales will do their best to keep Bitcoin alive for their own sake. If they succeed in their efforts, then a self-fulfilling prophecy will work for them… Is it a part of Satoshi’s long-term plan? I would like to say “highly likely in my conspiracy theory”.
Disclaimer: I wrote this article myself. It expresses my own opinions but does not necessarily reflect the position of the University of Houston.
Disclosure: For academic purpose, I purchased Bitcoin, Ethereum, and Litecoin on 1/27/2018 at USD100 for each. Except for them, I do not have any financial exposure to cryptocurrency prices, including futures contracts and cryptocurrency trusts. I have no business relationship with any cryptocurrency company. I have no plan to initiate any positions related to cryptocurrency prices and cryptocurrency company valuations. I am not receiving compensation for the article.
