What Is a Bitcoin Whale?
A bitcoin whale is a cryptocurrency term that refers to individuals or entities that hold large amounts of bitcoin. Whales hold enough cryptocurrency that they have the potential to manipulate the currency valuations.
- The three largest bitcoin holdings comprise 7.18% of all bitcoin in circulation and represent a value of approximately $621 million in February 2021.
- Bitcoin whales are like other majority asset holders: their movements have outsized impacts on the bitcoin market, either through increased volatility, decreased liquidity, or a combination of both.
- The biggest bitcoin whales are Satoshi Nakamoto, the inventor of bitcoin, the Winklevoss twins, and venture capitalists like Tim Draper and Barry Silbert.
Understanding the Bitcoin Whale
Large bitcoin holders are called whales because their movements disturb the waters that smaller fish swim in. Following the 80-20 rule (also known as the Pareto principle), the top 20% of bitcoin holders have more than 80% of bitcoin value in U.S. dollars. According to BitInfoCharts, just three bitcoin wallets owned 7.18% of all the bitcoin in circulation as of Q1 2021 with a value of just around $74 billion, and the top 100 wallets held around one-third of all bitcoin at a valued at $342 billion.
Whales can be a problem for bitcoin because the concentration of wealth, particularly if it sits unmoved in an account and lowers liquidity, which, in turn, can increase price volatility. Volatility is further increased if the whale moves a large quantity of bitcoin at once. If the seller is trying to sell bitcoin for state currency, the lack of liquidity and large transaction size could put downward pressure on the price of bitcoin, as other market participants see the transaction and also try to sell, creating a fire sale.
Because large holders may try to sell their assets in smaller amounts over a longer period to avoid drawing attention to themselves, they can produce market distortions, sending the price up or down unexpectedly. Whales create the conditions for speculation among the little fish, which can result in a vicious cycle where prices become untethered to underlying fundamentals.
Examples of a Bitcoin Whale
Given the fact that 100 wallets contain 32% of all bitcoin, is it possible to know who these whales are?
Bitcoin is pseudonymous, meaning account holder names are not obvious, but the ledger shows all addresses and transactions. So, we can speculate with some certainty about the identities of some bitcoin whales. Here are likely candidates.
The mystery of Satoshi Nakamoto has not been satisfactorily solved to date, but recently the story has taken a few twists. One likely candidate for the "real" Satoshi Nakamoto is Craig Wright, an Australian businessman who claimed to have invented the cryptocurrency with the help of his friend Dave Kleiman.
In 2019, Wright was sued by Kleiman's estate for half of his reported 1.1 million bitcoins. The details of the case are complex and made more so by Wright and Nakamoto's secretive nature, but if Wright does have 1 million bitcoin, he would most definitely be one of the top three bitcoin whales.
The Winklevoss Twins
Cameron and Tyler Winklevoss, famously played by Armie Hammer in the movie The Social Network, were early bitcoin adopters, enthusiasts, and evangelists. They are reported to hold more than 100,000 bitcoin, putting them in the list of the top three whales.
Tim Draper is an American venture capitalist and founder of the firm Draper Fisher Jurvetson, Draper University, Draper Venture Network, Draper Associates, and Draper Goren Holm.
Draper has made investments in Baidu, Hotmail, Skype, Tesla, SpaceX, AngelList, Twitter, DocuSign, Coinbase, Robinhood, Ancestry.com, Twitch, and Cruise Automation. He was also an early investor in bitcoin, buying approximately 42,000 bitcoin for six dollars each and storing them on the now-defunct Mt Gox exchange. After Mt Gox was hacked, Draper lost his entire holdings.
In July 2014, Draper received wide coverage for his purchase at a U.S. Marshals Service auction of approximately 30,000 bitcoins seized from the Silk Road marketplace website. His current holdings put him in the top 15% of all bitcoin investors.
Barry Silbert is the CEO and founder of Digital Currency Group, which has invested in more than 75 bitcoin-related companies. Digital Currency Group is also the owner of CoinDesk, a leading source of bitcoin news.
Silbert was at the same U.S. government auction as Draper and reportedly nabbed 48,000 bitcoins, putting him in the water as the last of our bitcoin whales.