A New Study By Chainalysis Suggests Bitcoin Whales Are Not Responsible For Volatility

Chainalysis, a blockchain research firm reveals a new study that frees the Bitcoin (BTC) whales from the allegation of being one of the causes of the price volatility. The volatility of the cryptocurrency market even worries the best bulls sometimes, a part of the blame is usually put on the power and influence held by the bitcoin whales with their fat digital wallets filled with a large amount of the cryptocurrency.

The new study examined the 32 largest BTC wallets, which reportedly represent 1 million BTC i.e. approximately $6.3 billion. The data analysis reveals:

“Bitcoin whales are a diverse group, and only about a third of them are active traders. And while these trading whales certainly have the capability of executing transactions large enough to move the market, they have, on net, traded against the herd, buying on price declines. “

Quite contrary to the common belief, the study further credits these whales to congregating and trying stabilizing the markets. The study states:

They (Whales) appear, in aggregate, to have stabilized the market during recent price declines, rather than exacerbating price movements. This makes sense since these trading whales are professionals with no vested interest in abruptly tanking the market. When they require liquidity, traders are likely to use OTC trading platforms equipped to manage large transactions with minimal market disruption.  

During the course of the research, the firm managed to divide the 32 wallets into four groups –

• Traders:  The most active of the lot, these nine wallets controls over 332,000 coins, worth over $2 billion. They regularly conduct bitcoin transactions on exchanges. The relatively recent traders entered the markets in 2017 and own only a third of total whale holdings.
• Miners and the Early Adopters: 15 investors, who hold a total of 332,000 coins(same as the traders) forms the second largest group of whales. They entered the market prior to 2017 and made significant divestments in 2016 and 2017 when the token soared.
• Lost: 5 wallets that hold over 212,000 coins, worth approximately $1.3 billion, these owners have lost their private keys and thus have lost access to their bitcoin holdings. This can be derived from the fact that no transactions was observed from these whales since 2011. ?
• Criminals: the smallest segment of the lost, it constitutes 3 wallets that hold over 125,000 coins and approximately $790 million. Two of them are connected with the Silk Road darknet market, while the other appears to be involved in money laundering.

The research further decrees that these whales did not t intensify volatility, the study further states:

“That net activity demonstrates that trading whales were not selling off Bitcoin in any mass amount, but rather were net receivers of Bitcoin from exchanges in late 2016 and 2017. This indicates that trading whales were, in aggregate, buying on declines and, consequently, were a stabilizing, rather than destabilizing factor in the market…”

When the bitcoin price surged to $19,000 in 2017, the crypto community wondered,  what if the 1,000 people owning 40 percent of all existing BTC cash it out simultaneously. A scenario like that can cause a glut in the market and sink prices to the advantage of certain traders and the loss of most.

The managing partner at Multicoin Capital, Kyle Samani, said then that he “think[s] there are a few hundred guys. They all probably can call each other, and they probably have.”

Read more: Research Suggests, 55% Of The World’s Bitcoin Are Held In 1% Of Wallets