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.

Bitcoin’s Low Volatility Might Mean Price Manipulation Is Waning

Since its inception, Bitcoin has exhibited a highly volatile nature. However, during the past few days, Bitcoin’s price volatility has fallen to the lowest level of 2018. The U.S. Securities and Exchange Commission (SEC) will most likely view Bitcoin’s calmer price oscillations favorably.

Low Volatility Signals That Investors Are Now Holding to Bitcoin

Bitcoin’s (BTC) 00 volatility has been decreasing recently. According to data provided by Highcharts, the Bitcoin volatility index for the latest 30-day estimate is 1.73 percent, and for the most recent 60-day estimate is 2.58 percent.

Legislators and regulators might view Bitcoin’s price stabilization as a positive sign. Investors may also be more likely to see Bitcoin as a potential replacement of gold as a store of value.

As FXEmpire financial expert Bob Mason put it, “The low volatility is also a statement that price manipulation has perhaps abated.”

Moreover, this new price trend indicates that investors are holding on to Bitcoin. According to Mason:

After wild swings and rollercoaster rides, Bitcoin looks to have settled into a long-term relationship with its investors, who are not speculating their days away and appear to be in it for the long haul.

On the other hand, traders might be the only ones who dislike smooth price fluctuations. Traders find sharp price swings, or volatility, in a financial asset to be quite attractive. As volatility increases, the potential to realize a profit more quickly also increases. Certainly, with higher volatility, the risk factor increases as well.

Regulators’ and Legislators’ Concern: Bitcoin Price Manipulation and High Volatility

Bitcoin’s erratic price trajectory might have been one of the main factors that motivated the SEC to reject ETF petitions. In this regard, the SEC has stated that it does not believe assertions that Bitcoin and Bitcoin markets are uniquely resistant to price manipulation and hence volatility.

For example, the SEC document explaining its second rejection of the Winklevoss Bitcoin Trust petition to trade the first ever Bitcoin ETF, refers to a commenter who noted that traders could manipulate trading on the Gemini Exchange because of low trading volumes, adding:

[…] The Trust’s documentation states that momentum pricing of bitcoin has resulted, and may continue to result, in speculation regarding future appreciation in the value of bitcoin, making the price of bitcoin more volatile.

Legislators also saw Bitcoin’s high volatility as pernicious. In July 2018, both the heads of both the SEC and Commodity Future Trading Commission had to attend a Senate banking committee hearing to explain the risks posed by Bitcoin and other cryptocurrencies’ volatility.

At the hearing, the regulators toned down senators’ concerns over the cryptocurrency’s “extreme volatility.” As Fortune reported, SEC Chairman Jay Clayton said:

Just recently the volatility in Bitcoin was not as great as the volatility we’ve seen in other securities, such as the VIX product.

Do you think Bitcoin’s recently reduced price volatility is good or bad? Let us know in the comments below!

Images courtesy of Buybitcoinworldwide (volatility index), Shutterstock.

Is Bitcoin Getting Boring Or Mature?

The world’s largest cryptocurrency has been trading in a tight range of $732 since September 7th. Volatility is currently sitting at its 17-month low, causing some experts to believe that Bitcoin is not as exciting, while others hold that it’s a sign that the market is maturing.

‘Not As Exciting’

Bitcoin captured the world’s attention in late 2017, surging to an all-time high (ATH) of around $20,000. 2018, however, marked the turning of the tides. Since its ATH value, BTC has lost over 60 percent and is currently trading at $6,610.03, according to CoinMarketCap. The entire cryptocurrency market saw around $600 billion wiped off the sheets.

What is more, what seemed like a normal day of Bitcoin trading marking 15 percent movement in either direction is no more. The cryptocurrency has traded in a rather tight $732 range since September 7th, which is the narrowest trading band for any consecutive 28-day period ever since December 2016, Bloomberg reports.

Some experts like Stephen Innes, head of Asia Pacific trading at Oanda Corp, believe that this is a signal that investors may be losing interest. He said:

It’s not that exciting anymore.


Other industry experts also seem to share the sentiment that volatility is actually a good thing for Bitcoin. Earlier this year, the co-founder of cryptocurrency exchange BitMEX, Arthur Hayes, noted:

You want as much volatility as possible to have as much chance that Bitcoin goes to $50,000, $100,000, $1,000,000, whatever that high number is.

Signs of a Maturing Market

Others, however, are on the opposite side, outlining that the decrease in volatility and the relative stability in Bitcoin’s price are a sign that speculative money is going away and that the market is maturing.

Speaking on the matter was Mike McGlone, Bloomberg Intelligence strategist, who noted:

This is a maturing market, so volatility should continue to decline. […] When you have a new market, it will be highly volatile until it establishes itself. There are more participants, more derivatives, more ways of trading, hedging and arbitraging.

Nigel Green, founder of DeVere Group, also shared a similar sentiment:

This could be a signal that the cryptocurrency market is maturing.

No matter what, financial analysts can always look at the exact same thing and come to different conclusions. Volatility is exciting, but usually only if the value is going up. Downward volatility always brought calls of the impending end of the world’s foremost cryptocurrency. It could also be that the current stability may only be fleeting. It’ll be interesting to see what will happen with Bitcoin for the remainder of 2018.
Do you think Bitcoin is getting boring? Or is this a sign of a truly maturing market? Let us know in the comments below!

Images courtesy of Shutterstock.

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