Chainalysis Finds That Bitcoin Whales Are Not the Sole Source of Market Volatility

Data from a detailed Chainalysis study found that Bitcoin whales may actually function as a stabilizing force in the market.

Who’s in Charge of the Market?

A newly published study from Chainalysis makes a strong case that Bitcoin (BTC) 00 whales are not the shadowy culprits behind the notorious volatility associated with Bitcoin and the wider cryptocurrency market. The blockchain research firm reached this conclusion by analyzing 32 of the largest bitcoin wallets, which contain a total of 1 million bitcoin worth nearly $6.3 billion.

To date, the general assumption among many traders has been that bitcoin whales impact price action by exerting their inordinate influence over the entire cryptocurrency market. Surprisingly, Chainalysis’ research goes against this common assumption by revealing that the ranks of bitcoin whales are comprised of “a diverse group,” and less than a third are actually active traders. Data also showed that these ‘trading whales’ displayed a tendency to accumulate on price declines rather than function as the sole force responsible for causing sell-offs.

Close analysis of the “trading” whales suggests that they do not significantly contribute to volatility as:

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…

Recent data from a separate study also shows that bitcoin whales and institutional investors often prefer to buy and sell cryptocurrency using over-the-counter (OTC) transactions instead of dumping large amounts of cryptocurrency on a variety of exchanges.

Whale breaching and diving.

Apparently, there are only 4 Whale Species

By dividing these 32 wallets into four groups, Chainalysis was able to determine that nine of the wallets with more than 332,000 coins were controlled by traders who sprung up around 2017 and this group made regular transactions on exchanges. The second group of 15 wallets comprised mainly of miners and early adopters in charge of 332,000 coins was relatively action-free except for the occasional sales when bitcoin prices skyrocketed from 2016 to 2017.

Chainalysis concluded that the two remaining groups consisted of three wallets belonging to “criminals” in possession of more than 125,000 coins and forever “lost” wallets and with a coin value of more than $1.3 billion (212,000 BTC).  

Facts Help the FUD Dissipate

The Chainalysis report provides a fascinating insight into the detailed movements and holdings of bitcoin whales and in a market that is heavily driven by rumor and speculation, a bit of solid research that shines a correct light on market misconceptions is always a welcome treat.


On the topic of rumors, manipulation, and whales, surely the crypto-verse will wonder exactly which whale just moved
15,220 ($100,317,283) from between wallets.

Do you think Bitcoin whales drive the market — or is the Chainalysis report a better explanation for what moves the market? Share your thoughts in the comments below! 

Images and media courtesy of Shutterstock, Twitter/@WhaleAlert.

Price Manipulation through Use of Crypto Trading Bots Rampant: WSJ Report

If you are familiar with cryptocurrencies, you will be knowing how volatile the market swings are which has the potential to make or break a cryptocurrency investor. Often these large swings are the result of unscrupulous methods used by traders who employ software guided bots to move the prices to their sides. And, according to a Wall Street Journal (WSJ) report, this practice going to stay here for a long time, which is very concerning.

Due to this higher risk of market manipulation, SEC kept on rejecting Bitcoin ETFs application since August this year. Andy Bromberg, President and Co-Founder of CoinList also said that the bots are rampant marketwide at least at the present time. Bots enable pump and dump scheme, that allows traders to push the prices higher just before selling their position to make a profit. And, in the process investors who had opened a position in that level ends up with a huge loss.

As reported in WSJ in August, crypto pump groups executed at least $825 million worth of trades in a six-month period. Stefan Qin, Managing Partner at a crypto hedge fund Virgil Capital which specializes in arbitrage also uses its own bots to handle enemy bots.

It also suffered a similar harassing bot when it was looking for the arbitrage opportunity, a hostile bot posted an order to sell Ether at a lower price than what other sellers were quoting, which prompted Virgil to initiate a buy order. Right before Virgil was about to complete its purchase, the bot would cancel its sell order. This resulted in purchase order never get executed leading to the increase in price on other exchanges.

The practice of faking order which is termed as spoofing gives a wrong impression of the actual supply-demand scenario. There are many abusive bots going around the market currently, one such is “ping-pong” which allows users to execute trades to themselves giving an impression of higher trading activity in a particular cryptocurrency.

US CFTC and US Department of Justice has already initiated an investigation on market manipulation of cryptocurrency and also issued a consumer warning on pump and dump schemes involving cryptocurrencies. It has offered cash rewards for whistleblowers, those who provide evidence of such operations.

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CFTC Reportedly Joins the Investigation Against Bitcoin Price Manipulation

Source: Form PF News

On the regulatory front, things don’t seem to be looking too good for cryptocurrency. A couple of weeks back, there were reports of the US Justice Department investigating claims of bitcoin price manipulation.

Now, what will come as a bit of shock, the US Commodity Futures Trading Commission (CFTC) has joined in the investigations. According to a report by the Wall Street Journal, “an anonymous source familiar with the matter CFTC is coordinating with the U.S. Justice Department in conducting investigations into price manipulation in the spot BTC markets.”


Additionally, the report adds that the regulatory body launched a criminal probe against the price manipulation after several cryptocurrency exchanges declined to share trading data with Chicago Mercantile Exchange (CME).

The CME had asked for a few hours of trading data instead of the originally requested full day’s.

This wasn’t the last time, American exchanges had butted heads with the bureaucracy.

In April, the Attorney General had sent a detailed questionnaire to 13 exchanges. These exchanges included prominent ones such as Bitstamp, Coinbase, Itbit, and Kraken, among others.

At the time, Attorney General, Eric T. Schneiderman had said, “With cryptocurrency on the rise, consumers in New York and across the country have a right to transparency and accountability when they invest their money. Yet too often, consumers don’t have the basic facts they need to assess the fairness, integrity, and security of these trading platforms. Our Virtual Markets Integrity Initiative sets out to change that, promoting the accountability and transparency in the virtual currency marketplace that investors and consumers deserve.”

Although others did not directly defy the questions, cryptocurrency exchange flat-out refused to answer any question. In a blogpost the exchange had said, “Kraken’s BitLicense-prompted exit from New York in 2015 pays another dividend today. I realized that we made the wise decision to get the hell out of New York three years ago and that we can dodge this bullet.”

They had also said that, the two-week deadline was “unreasonable” and that “this information is proprietary, trade secret information and kept confidential for competitive reasons.”

According to crypto news portal, Bitcoin News, since bitcoin is counted as a commodity, it technically falls under the CFTC’s jurisdiction.  Laurie Bischel, CME spokeswoman said, “All participating exchanges are required to share information, including cooperation with inquiries and investigations.”

Jesse Powell, the Chief Executive Officer told the news portal, “newly declared oversight” of the CFTC “has the spot exchanges questioning the value and cost of their index participation.”

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