If you are interested to learn more about crypto-billionaires, you should read this great article on Brave New Coins. Let me just give you a short introduction to this fascinating topic of crypto-riches and the crypto-establishment.I n February 2018, the FORBES magazine created its first “Crypto-Rich List” which means something for such new phenomena, Í guess.
Holders of large amounts of Bitcoin are often known as whales. And they’re becoming a worry for investors. They can send prices plummeting by selling even a portion of their holdings. Basically, we can differentiate between three types of Bitcoin whales:
- Freeks, Geeks and early adopters: people who are sitting on millions in cryptocurrency because the played around with Bitcoin mining in the early days of bought some Bitcoins just for fun when the price was below one dollar.
- Visionary HNIs: and risk-loving high-net-worth individuals (HNI) who have recently discovered the cryptocurrency market as a new arena for money making, and
- Innovative Institutionals: institutional investors such as hedge funds and proprietary trading desks who are placing large bets on where the market will move next.
Interestingly, only around 1,000 people own 40 percent of all existing Bitcoin, which means that there just are a few whales in a big ocean of little fish. It also means that if some of these whales start to sell large chunks of their bitcoin holdings, the market is in for an ugly ride.
A recent example is the Mt. Gox bankruptcy trustee Nobuaki Kobayashi who recently sold off 36,000 BTC in five lots between December 2017 and February this year which influenced the Bitcoin price significantly. When “Bitcoin Jesus” Roger Ver sold 25,000 BTC (worth $159 million) in November 12, 2017, many investors were spooked, fearing that he was about to sell this holding. In a market with a capitalization of $100 billion (at the time), selling $159 million worth of bitcoin in one tranche it is something. Despite the general hype , the market corrected that day in anticipation of this expected trade.
Originally, whales traded on crypto-exchanges as most other crypto-traders do. However, as the crypto-asset market has matured, more and more OTC brokers have launched to service large bitcoin investors who are trading digital currencies over the counter to preserve their anonymity and to be able to access more liquidity than exchanges can provide.
OTC brokers Circle Trade have a minimum ticket size of $100,000 and $250,000 for digital currency trades, which means that wealthy bitcoin holders can trade amongst each other without trades ever actually touching exchanges. In some cases, OTC brokers will source liquidity from different exchanges to close out trades and reduce the impact of a large sell or buy transaction on the overall market.
Whales’ trading behaviour is extremely important for the price of the respective token or coin. In cryptos with small market capitalizations, the market will move substantially if a significant holder decides to sell part of their portfolio, or if a large buyer comes in. Therefore, it is important to be aware of the wealth distribution of smaller token and coins before you invest in them and to keep a close eye on order books.