Bitcoin Price Manipulation by Whales – Fact or Fiction?
The Bitcoin paradox is something of a dilemma. On the one hand, Bitcoin sells itself as a financial equalizer. But at the same time it is one of the most unevenly distributed assets in the world.
Kitco News’s David Lin raised the issue in a discussion with GraniteShares’s director of research, Ryan Giannotto.
Giannotto agreed with Lin, calling it one of the fundamental ironies of Bitcoin. Giannotto:
“It is intended to be a financially democratizing force and yet it is so profoundly unevenly distributed. It’s a seriously cornered asset class where only about one-500th percent of Crypto Trader investors control over 40% of Bitcoins. And that’s a serious, serious problem. “
In general, a bitcoin whale is defined as a unit that holds more than 1,000 BTC. Some expand this definition to include addresses with 100 or more BTC as well.
Data from bitinfocharts.com supports Giannotto’s analysis of the situation. They show that 2,419 addresses hold 1,000 or more BTC.
Although these addresses only make up 0.01% of all addresses, they control 43% of the Bitcoin supply (to buy Bitcoins with Sofortüberweisung instructions ).
If the analysis is expanded to include addresses with BTC> 100, an even greater unequal distribution becomes apparent: 0.05% of the addresses hold 62% of the Bitcoin. Overall, more and more Bitcoin is being bought.
However, unequal distribution is a problem that affects all asset classes. Lin cites the example of Elon Musk’s 20% stake in Tesla stock and asks how this is different.
Giannotto believes that the degree of unequal distribution of BTC is very extreme. To illustrate his point, he cited the example of the Hunt brothers, who held an estimated one-third of the world’s private silver supply.
Between 1979 and 1980, the Hunt brothers were able to push the price of silver from $ 6 to $ 40. Giannotto:
„Even the Hunt brothers couldn’t dream in their wildest fantasies about how cornered Bitcoin is.“
With such tight control of BTC supply exercised by so few, the Bitcoin market is at the mercy of the whales.
Bitcoin whales suffer from „bad reputation“
Undoubtedly, Bitcoin whales play an important role in the BTC economy.
They can choose to withdraw liquidity by not engaging in market activity. Likewise, the oversized effects of moving large amounts of BTC in a relatively illiquid market add to the volatility.
That said , Eric Stone, head of data science at Flipside, believes that whales in general have a self-interest in protecting their horde. As such, they tend to act in ways that favor long-term growth.
„They will cautiously liquidate relatively small amounts of BTC over time rather than risking a supply shock by liquidating larger chunks at once.“
Yet despite Stone’s assessment, the psychology of greed and power suggests that enough is never enough.