Category Archives: whales

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Whales Stabilize the Bitcoin Market

A study released by Chainalysis indicates that Bitcoin “whales” are, in fact, a positive and stabilizing force in the Bitcoin market overall. Also, the study has categorized these owners of large sums of Bitcoin into four types: trader whales, miner and early adopter whales, lost whales and criminal whales.

There is often hype that these Bitcoin owners leverage their holdings to manipulate the market. A recent example was in August 2018 when a trader with USD 2 billion of Bitcoin was blamed for causing a 15% price decline by selling BTC 50,000 worth USD 300 million in a month.

However, the study points out that these owners are the ones that have the most to lose if Bitcoin’s price goes down since they hold the most amount of Bitcoin. It shows data demonstrating how whales are actually a stabilizing force in the Bitcoin market, often buying when price declines, helping stabilize and reverse price declines. In fact, as a whole, they consistently invest more in Bitcoin than they divest; there was no time during the past year where whales as an aggregate sold more Bitcoin than they bought. Therefore, they apply positive pressure on Bitcoin’s price in the long term.

Chainalysis finds that not all whales are made equal. It identifies trader whales as the most active and relevant as they regularly buy and sell Bitcoin on exchanges and, therefore, have the most impact on Bitcoin’s price compared to other types. Of the 32 entities analyzed, the trader whales control BTC 332,000 worth over USD 2 billion. This is actually a relatively small amount considering that Bitcoin’s daily trading volume if often USD 5 billion per day or more on spot exchanges alone and not including OTC markets, showing how this group couldn’t impact Bitcoin’s price that much even if it wanted to.

Those identified as miners or early adopters came into large amounts of Bitcoin early. Chainalysis finds that this group has very low trading activity and made significant divestments during 2016 and 2017 as Bitcoin’s price rose.

Lost whales are people that lost their private keys, which is assumed based on their lack of activity since 2011. These aren’t true whales since they are just idle wallets that can’t interact with the market at all. Supposedly, BTC 212,000 worth USD 1.3 billion lie in this category.

The final species identified are criminal whales, linked to darknet marketplaces like Silk Road and illegal activities such as money laundering. These control BTC 125,000 worth USD 790 million, making them the smallest group of Bitcoin whales.

 

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Winklevoss’s Gemini Integrates Block Trading for Crypto Whales

Trading platform Gemini, founded by the Winklevoss twins, announced Monday the introduction of block trading, with the goal of facilitating trades for those looking to exchange large sums of cryptocurrency.

As more institutional traders enter the market, publicly-open trading exchanges are not equipped to facilitate their substantial currency transactions and are extremely sensitive to high-value trades that take place.

The Winklevoss twins are looking to cater to the growing number of investors and hedge fund managers utilizing the cryptocurrency market while proving that block trading can potentially be conducted without destabilizing the market.

Block trading

Most exchanges maintain a central limit order book that keeps all transactions under a certain size, restricting trades to reflect the demand for the particular currency at the time. These limitations are there to prevent retail traders reacting to false signals of market movements that larger trades would create.

Block trading is utilized to overcome these restrictions, with larger trades that exceed the limitations being settled privately between the involved parties. A post on the Gemini blog lays out the conditions necessary for block trades to take place on the platform: “Any customer can place a block order that specifies: (i) buy or sell, (ii) quantity, (iii) minimum required fill quantity, and (iv) a price limit (the “Indication of Interest”)”.

The block trading orders will take place outside of Gemini’s continuous order books, with the pending transaction only successful if “a market maker agrees to “make a market” that satisfies the Indication of Interest”. There is a minimum investment of 10 BTC or 100 ETH to participate in block trades.

Gemini’s block trading service will go live on 12 April at 9.30am (EST). The exchange platform aims to publish confirmed trade information on its data feed within 10 minutes of being finalized. Block trading has the potential to reduce market volatility caused by cryptocurrency “whales” (the term given to large-volume traders) selling off large portions of their assets.

A recent substantial sell-off by a trader using the handle Mt. Gox, is reported to have influenced Bitcoin’s recent crash that reached nearly USD 6,000. Other platforms have already adopted block trading, most notably gaining popularity in Asian-based exchanges. Circle Trade is one such platform already utilizing block trading, with its website citing it is currently moving USD 2 billion a month.

Block trading companies have recently gained massive popularity in Asian trading hubs such as Hong Kong and also in Australia. With significant financial players including the Rothschilds, the Rockefellers and George Soros entering the cryptocurrency market, block trading is going to be a necessary adoption for all platforms looking to cater to these investors.

 

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