Since the start of this year, cryptocurrency markets have lost approximately 80% of their overall value in a series of abrupt price declines. While the crashes have been frequent and their effects have lingered, the jury is still out regarding their causes. According to a discussion on the online forum, Reddit, the latest slump in bitcoin’s prices, during which it lost approximately 16% of its total value in four days, may have been caused due to investor fears about a bitcoin whale moving coins from a wallet. The wallet has an address associated with Silk Road, the infamous dark web store which sells everything from drugs and guns to steroids and medical supplies.
The Reddit poster calculates that the original wallet had bitcoin holdings worth $844 million translating to approximately 111,114.62 coin holdings of bitcoin and bitcoin cash. Coins were last moved from the wallet in March 2014. After laying dormant for the last four years, the wallet showed signs of activity recently. According to the Reddit poster, the wallet’s owner moved 60,000 coins in 100 coin chunks over the last two weeks. 2980 coins have been moved to a wallet on Binance, the world’s largest crypto trading platform. The wallet’s owner is also attempting to evade identification by moving the coins between multiple nodes.
Can Bitcoin Whales Affect Cryptocurrency Markets?
This is not the first time that bitcoin whales are being blamed for a crash in cryptocurrency markets. Media reports had blamed the sale of $400 million worth of cryptocurrencies by former Mt. Gox trustee Nobuaki Kobayashi for a market crash earlier this year. However, Kobayashi later elaborated that he had sold the stash in chunks between Dec. 2017 and Feb. 2018 to avoid affecting crypto prices. Markets were on a bull run in December, which culminated with bitcoin almost touching $20,000. For most of January and February (and the rest of this year), cryptocurrency markets were in bear territory (See also: Bitcoin Bloodbath: $53 Billion Wiped Off Crypto Market Cap). That has resulted in a loss of liquidity as investors cashed out on their investments or shifted them elsewhere. This may make them susceptible to manipulation.
“The main problem of the cryptocurrency market at this stage is low liquidity and, as a consequence, a high degree of susceptibility to manipulation,” said Yuri Adveev, CEO of blockchain platform CINDX. According to him, an increase in the numbers of Tether, a stablecoin, and movement of large amounts of cryptocurrency from “large wallets” has caused an increase in bitcoin prices. Such situations could result in short-term losses for inexperienced market participants, he said.
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