The crypto industry is beginning to calm down from the academic claims that one Whale’s manipulation tactics were responsible for Bitcoin’s major parabolic rally in 2017. No one is disputing that price manipulation in the crypto market is a real concern, but as one insider quipped: “The idea that a lone whale fueled this yearlong Bitcoin bull run is more than a little silly.” A new report surfaced today that contends that Bitcoin Whales do have “considerable influence”, but as the market evolves, “whales are a dying breed”.
This new report comes to us from Frank van Weert, the CEO and founder of crypto watchdog ‘Whale Alert’. His firm literally tracks every large transaction, especially those emanating from large account balance hodlers, or “Whales” in crypto parlance. It is no urban myth that price manipulation is a major industry issue. There have been several instances where large capital flows have coincidentally occurred during massive surges and dramatic pullbacks of Bitcoin, as well as for other altcoin programs. The Securities and Exchange Commission (SEC) agrees.
Until exchanges commit to regulatory oversight and install monitoring software designed to detect potential cases of manipulation, the “wild wild west” nature of cryptocurrencies will persist, and the SEC will continue to cite its presence as a reason for withholding its approval for any Bitcoin Exchange-Traded Fund (ETF) application.
Timely occurrences of transactional history, however, are not proof of causation, as van Weert will tell you, but even he thinks the obvious instances are worthy of speculation, as he relayed to CCN: “Whale transactions can have a really profound effect on price in the market. […] Knowing where the currency flows is a great way of predicting stuff.”
When Bloomberg sensationalized the storyline that one Whale caused the Bitcoin rally in 2017, it focused on Tether, a stablecoin pegged to the U.S. Dollar, and supported the premise of two college professors that flows in and out of this medium of exchange were used to pump up Bitcoin valuations. The furor generated by this story was immense, as nearly every financial news outlet picked up the “clickbait” story and ran with it. Crypto industry experts have since debunked the claim to a large degree, but the stigma stays.
These same experts, along with van Weert, contend that any relationship between Bitcoin’s 2017 surge and Tether is purely coincidental. They do concede, however, that Tether may have played a part in Bitcoin’s 2019 rally. The fact is that Tether was the first stablecoin to gather traction. Traders immediately saw it as a “holding station” for closed positions, a way of keeping capital within the crypto-sphere, instead of moving the transaction through a fiat currency, which might have triggered tax consequences in some jurisdictions.
The pool in the Tether universe has grown from $1 trillion to $4 trillion, and investors and analysts, alike, focus on movements in and out now as a leading indicator of movements back into risk-bearing instruments, i.e., Bitcoin and altcoins. Per van Weert: “A lot of people see those as a positive market development: they assume those USDT are going to be used to buy BTC. Now, I don’t know if that assumption is correct, but a lot of people reacted to that, I think—to the issuance of Tether.”
The second opinion of van Weert, the more interesting one, is that Whales are not evolving with the system. He believes their day has come and gone, and that, over time, “the extinction of these leviathan hoarders was inevitable”. He foresees the economic pressure for selling to cause large account holders to slowly capitulate, but it will not happen overnight.
Van Weert concludes: “Bitcoin started with a few people. So the biggest chunk of the coins is going to be in the hands of the people who started it. Eventually, those people will have to sell their coins, and more people are interested—more people are buying—and so, eventually, the distribution of BTC is going to hopefully level out a bit more, and there’s going to be, hopefully, fewer whales.”