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Bitcoin price manipulation by whales a real thing?

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The Bitcoin paradox presents something of a predicament. For one thing, Bitcoin sells itself as a financial equalizer. But at the same time, it is one of the most unevenly distributed assets in the world.

David Lin of Kitco News raised this point in a discussion with GraniteShares Research Director Ryan Giannotto.

Giannotto agreed with Lin's assessment, calling this one of the fundamental ironies of Bitcoin. He said:

“It is intended to be a force for financial democratization, yet so deeply unevenly distributed.

It is a seriously cornered asset class, where only around 500% of Bitcoin investors control more than 40% of Bitcoin. And this is a serious, serious problem ”.

Generally speaking, a Bitcoin whale is defined as an entity that owns more than 1000 BTC. Some would extend this definition to include addresses with 100 or more BTC as well.

The data from bitinfocharts.com supports the analysis of the Giannotto situation.

It shows that 2,419 addresses contain 1,000 or more BTC. Although these addresses represent only 0.01% of all addresses, they control 43% of the Bitcoin supply.

Expanding the analysis to include addresses with BTC> 100 paints an even greater degree of uneven distribution, with 0.05% of addresses owning 62% of Bitcoin.

Bitcoin distribution chart

Source: bitinfocharts.com

Market manipulation

However, uneven distribution is a problem that affects all asset classes. Lin gives the example of Elon Musk's 20% stake in Tesla stock, and asks, how is this different?

Giannotto believes that the degree of uneven distribution of BTC is very extreme. To illustrate his point, he relied on the example of the Hunt brothers, who are estimated to own a third of the world's private supply of silver.

Between 1979 and 1980, the Hunt brothers were able to raise the price of silver from $ 6 to $ 40.

"Not even with the Hunt brothers could he dream in his wildest fantasies of how cornered Bitcoin is."

On that, Giannotto said that with such strict controls on the supply of BTC, and for so few, the Bitcoin market is at the mercy of the whales.

Bitcoin whales get a bad rap

Undoubtedly, as movers and shakers, Bitcoin whales play an important role.

They can choose to withdraw liquidity, by not participating in market activity. Similarly, the outsized effects of moving large amounts of BTC, in a relatively illiquid market, increases volatility.

However, Eric Stone, Flipside's director of data science, subscribes to the idea that whales are generally interested in protecting their horde. As such, they tend to act in ways that are conducive to long-term growth.

"They will cautiously liquidate relatively small amounts of BTC over time, rather than risk a supply shock by liquidating larger chunks at once."

Yet despite Stone's assessment, the psychology of greed and power suggests that it is never enough.



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