October 7, 2022


Taking their names from the size of the massive mammals that swim around the earth’s oceans, cryptocurrency whales refer to individuals or entities that hold large amounts of cryptocurrency.

In the case of Bitcoin (BTC), someone can be considered a whale if they have over 1,000 BTC and there are less than 2,500 of them out there. As Bitcoin addresses are pseudonymous, it is often difficult to ascertain who owns a wallet.

While many associate the term “whale” with a few lucky early adopters of Bitcoin, not all whales are the same, indeed. There are many different categories:

Exchanges: Since the mass adoption of cryptocurrencies, cryptocurrency exchanges have become some of the largest whale wallets as they hold large amounts of crypto in their order books.

Institutions and companies: Under CEO Michael Saylor, software company MicroStrategy holds over 130,000 BTC. Other publicly traded companies such as Square and Tesla have also bought large holdings of Bitcoin. Countries like El Salvador have also bought a significant amount of Bitcoin to add to their cash reserves. There are custodians like Greyscale that hold Bitcoins on behalf of large investors.

Individuals: Many whales bought Bitcoin early when its price was much lower than today. Gemini crypto exchange founders Cameron and Tyler Winklevoss invested $11 million in Bitcoin in 2013 at $141 per coin, buying over 78,000 BTC. American venture capitalist Tim Draper bought 29,656 BTC at $632 each in a United States Marshal’s Service auction. Digital Currency Group founder and CEO Barry Silbert attended the same auction and acquired 48,000 BTC.

Wrapped BTC: Currently, over 236,000 BTC is wrapped on the Wrapped Bitcoin (wBTC) ERC-20 token. These wBTC are mostly held in custodians that maintain a 1:1 connection with Bitcoin.

Satoshi Nakamoto: The mysterious and unknown creator of Bitcoin deserves a category of its own. It is estimated that Satoshi may have over 1 million BTC. While there is no wallet that holds 1 million BTC, using on-chain data shows that of the first approximately 1.8 million BTC that were first created, 63% were never spent, making Satoshi a multi-billionaire.

Centralization in the decentralized world

Critics of the crypto ecosystem say that whales make this space centralized, perhaps even more centralized than traditional financial markets. A Bloomberg report he claimed that 2% of accounts controlled over 95% of Bitcoin. Estimates say that the world’s top 1% control 50% of the world’s wealth, meaning that wealth inequality in Bitcoin is more widespread than in traditional financial systems: a category that breaks the idea that Bitcoin can possibly break central hegemonies.

The burden of concentration in the Bitcoin ecosystem has dire consequences that can potentially make the cryptocurrency market easily manipulated.

However, information from Glassnode shows that these numbers appear to be exaggerated and ignore the nature of the addresses. There may be some degree of concentration, but that may be a function of free markets. Especially when there are no market regulations and some whales understand and trust Bitcoin more than the average retail investor, this concentration is bound to happen.

The “wall of sales”

Sometimes, a whale places a huge order to sell a huge chunk of their Bitcoin. They keep the price lower than other sell orders. This causes volatility, resulting in a general decrease in real-time Bitcoin prices. A chain reaction ensues where people panic and start selling their Bitcoin at a cheaper price.

The price of BTC will stabilize only when the whale pulls the big sell orders. So now the price is where the whales want it so they can accumulate more coins at their desired price point. The following tactic is known as a “sales wall”.

The opposite of this tactic is known as the Fear of Missing Out, or FOMO, tactic. This happens when whales put enormous buying pressure on the market at higher prices than with current demand, which forces bidders to increase their bid price in order to sell orders and fill their buy orders. However, this tactic takes significant amounts of capital that are not required to pull off a selling wall.

Watching whales sell and buy patterns can sometimes be good indicators of price movements. There are sites like Whalemap dedicated to tracking every whale count, and Twitter handles like Whale Alert, which was a guide for Twitter users around the world to stay informed of whale movements.

When a whale makes a splash

Sixty-four of the top 100 addresses have yet to withdraw or transfer Bitcoin, showing that the biggest whales may be the largest owners of the ecosystem, seemingly due to the profitability of their investment.

Evidence that whales remain mostly profitable is clear from the chart above. When calculated on a 30-day moving average, over the past decade, whales have remained profitable over 70% of the time. In many ways, their confidence in Bitcoin is what is driving the price action. Being profitable (month to month in this case) for most of their investment period helps strengthen their belief in the hodl strategy.

Even in 2022, one of the most bearish years in Bitcoin history, exchange balances have fallen, showing that most HODLers are hogging their Bitcoin. Most experienced cryptocurrency investors avoid keeping their long-term Bitcoin investments on exchanges, using cold wallets for holding.

Kabir Seth, founder of Speedbox and a long-term Bitcoin investor, told Cointelegraph:

“Most whales have seen too many Bitcoin buying cycles to have the patience to wait for the next one. In the Bitcoin ecosystem now, the whales’ faith is fueled by the macro economics of inflation and more recently, the correlation with stock markets. Whale wallet chain data shows that most of them are owners. Those that came during this market cycle have not made a profit to sell. There is no reason to believe that whales will abandon Bitcoin ship, especially when there is economic fear of an impending recession.”

Kabir’s point about the macro economy and the correlation with the stock market can be seen in the chart below, which shows that since the last market cycle in early 2018, Bitcoin has closely followed traditional investment assets.

The silver lining in this trend is that Bitcoin has entered the mainstream in terms of consumer sentiment, changing its reputation as a peripheral asset. On the other hand, a 0.6 Pearson correlation with the S&P 500 is by no means a hedge against traditional markets. Other experts in the crypto ecosystem also seem to be disappointed with this trend.

The broader macro economy may be a major reason for the correlation between stocks and Bitcoin. The past two years have seen capital inflows into the stock markets that were unparalleled in history. There are theories that in a prolonged bear market or in terms of financial disasters, the correlation with the stock market may break.

What does it mean when he sells a whale?

Although only looking at the data on the chain for the last three months shows that the number of whale wallets decreased by almost 10%. However, there was a corresponding increase in wallets holding from 1 BTC to 1,000 BTC. The whales appear to be scoffing at their positions and the largest retail investors have piled in in turn, providing liquidity to the whales. The historical trend shows that whenever this happens, there will be a short-term decline in Bitcoin prices, which will eventually lead to the whales starting to aggressively accumulate more.

When asked about the very recent whale sell-off, Seth said:

“It’s almost inevitable that there will be a period of a few weeks when the Whalers start selling. This is the mechanism of market movements. Currently, the broader market sentiment for Bitcoin is that the Bottom is in. There are sentiment analysis tools to confirm this. Some whales may be playing against this trend, in turn creating more panic in the market. If there is a big selloff now, Bitcoin prices may fall as retail support is broken. Only the whales will have the liquidity to accumulate then.”

What the market can learn from the view of Kabir and the whales is that the future of Bitcoin is where the bet should be. At the local level, emotions can be manipulated and prices can be influenced. However, in the long run, when the dust settles, the owners will prevail.