Since the beginning of the year, the number of Bitcoin whales (wallets that hold 1000+ BTC) has increased significantly, creating more bitcoin millionaires. Glassnode statistics show that, from March 2020 to February 2021, wallets holding 1,000-10,000 BTC have increased by 14.18%. But what exactly does this statistic mean, and does it have any effect on the retail investor?
Institutional money is listening
The existence of whales is a sign of positive adoption at the corporate and institutional levels. Since its inception, Bitcoin has struggled to gain recognition by legitimate financial bodies, with many dismissing it as insignificant at best and dangerous at worst. But as the years roll on and the Bitcoin price trends further upwards, those financial bodies have begun to listen. This is noticeable by the sheer amount of economic news coverage and SEC attention it receives, but it is easiest to see this by the increase in whale wallets.
Large financial institutions do not invest in assets they do not see a future in, so expect to see Bitcoin treated as a more commonplace payment option in the future, with more companies being welcoming to it. This spells good news for the assetr, as word of adoption has always brought the Bitcoin price upwards; look at the effect Elon Musk had by planning to accept Bitcoin as a Tesla payment option.
The market is more vulnerable to manipulation
These massive wallets can also cause problems for the market, as a large concentration of funds can make price manipulation easier. When humpback whales (wallets containing 5,000+ BTC) move massive quantities around, it can have an immediate effect on how the market reacts. These Bitcoin millionaires can drive the price upwards or bring it down.
Of course, this does not automatically spell manipulation, but it does make the market more prone to it, as it is far easier for a whale to affect an overall price than it is for smaller traders who own significantly less Bitcoin. There are occasionally fears that many whales work together to artificially hold the Bitcoin price down, as their financial power would give them the ability to. While this is theoretically possible, it is an unfounded claim.
However, what is true is that Bitcoin millionaires make the market volatile in a very different way. The crypto market is, first and foremost, volatile because of the sheer number of retail traders, but the increase in larger wallets means that it is becoming volatile for essentially the opposite reason and the fact that Bitcoin has so many people invested at all wealth brackets means that the price will act even more erratically than it used to.
Should traders be worried?
The idea of Bitcoin whales can make some traders nervous, but there is nothing to fear as Bitcoin has always been a strange and volatile market, and it has always survived attempts at manipulation. The most important takeaway from the increase in high-value wallets is that it is a clear point towards further adoption, which will help the price continue to increase in the long run.