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Research: Bitcoin whales make the cryptocurrency market less volatile

Let them swim free!

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Fears that Bitcoin BTC whales could dump enormous amounts of coins crash the market might be absolutely groundless – or so does new research suggest.

Researchers from Chainalysis examined the transaction history of the 32 largest Bitcoin wallets and concluded that – contrary to popular belief – big-time cryptocurrency whales play a crucial role in keeping the market stable.

More than one type of whale

Chainalysis identified four types of whales: Traders, miners and early adopters, wallets with lost private keys, and criminals.

Miners and early adopters have been hodling their cryptocurrency of late; their trading activity is extremely low. Chainalysis estimates this group holds $2 billion worth of BTC.

The “lost” whales make up a group worth $1.3 billion. These are wallets considered to be completely inactive, having not made any transactions since 2011.

Criminal whales are the smallest segment of whales, owning around $790 million worth of BTC. Two of these whales were identified as being part of the Silk Road operation, and others have been implicated in money laundering cases.

However, it is the group of trading whales, known as “traders,” that are most active. In this group, just nine wallets hold over $2 billion worth of Bitcoin. Most of these whales joined the market in 2017.

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Why tank the market?

There is no denying Bitcoin whales have enough funds to perform transactions that could negatively impact the market.

That said, there is no incentive for actively trading whales to dump coins as market values drop. It would only serve to further harm the value of any assets they do hold on to.

The research shows the actively trading whales were the leading purchasers of Bitcoin during major price declines in 2017 and most of 2018.

As a result, during market downturns the whales help to collectively stabilize cryptocurrency markets.

Maybe we should all stop worrying so much about whales negatively impacting the market. But this is cryptocurrency, anything could happen.

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Published October 11, 2018 — 12:58 UTC