Bitcoin Has A “Whale” Problem: 1,000 Investors Control Nearly Half The Market

Saturday, December 9, 2017
By Paul Martin

by Tyler Durden
Dec 8, 2017

If Jay Gould were alive today, he would’ve traded bitcoin.

Perhaps the most blatant hypocrisy perpetrated by bitcoin evangelists is their insistence that bitcoin and other digital currencies represent a return to a truly democratic financial system beyond the control of banks and other special interests, where players small and large can earn enormous profits simply by HODLing.

Of course, this idealistic take couldn’t be further from the truth. As Bloomberg points out, the markets for bitcoin and most of its cryptocurrency clones more closely resemble the US equity market of the Gilded Age, where a handful of powerful traders and brokers colluded to move prices in their favor. And because securities laws at the time were virtually nonexistent, the big players minted suckers with impunity.

According to Bloomberg, about 1,000 so-called “whales” control 40% of the bitcoin in circulation, giving them unrivaled leverage over the broader market. And because there are no laws explicitly banning collusion in digital currency markets, only the most blatant pump-and-dump operations risk being prosecuted as fraud.

And with the price skyrocketing like it has in recent days, the incentive for these traders to begin taking profits has never been more pressing.

About 40 percent of bitcoin is held by perhaps 1,000 users; at current prices, each may want to sell about half of his or her holdings, says Aaron Brown, former managing director and head of financial markets research at AQR Capital Management. (Brown is a contributor to the Bloomberg Prophets online column.) What’s more, the whales can coordinate their moves or preview them to a select few. Many of the large owners have known one another for years and stuck by bitcoin through the early days when it was derided, and they can potentially band together to tank or prop up the market.

“I think there are a few hundred guys,” says Kyle Samani, managing partner at Multicoin Capital. “They all probably can call each other, and they probably have.” One reason to think so: At least some kinds of information sharing are legal, says Gary Ross, a securities lawyer at Ross & Shulga. Because bitcoin is a digital currency and not a security, he says, there’s no prohibition against a trade in which a group agrees to buy enough to push the price up and then cashes out in minutes.

The Rest…HERE

2 Responses to “Bitcoin Has A “Whale” Problem: 1,000 Investors Control Nearly Half The Market”

  1. Paul

    If you were serious about discussing whale problems you might want to take another look at gold and silver. Apparently you have no problem with just a handful controlling the gold and silver market depressing prices so the real monopolies of fiat currency can have their way. If you can’t see what is really going on with bitcoin specifically you have not done your research properly and should defer commenting until you have. It takes years of mining and many billions in investment to build the infrastructure to handle bitcoin retail transactions. It is being done at a very rapid pace. In less than 2 years retailers everywhere will be accepting bitcoin as payment. It can not and will not be stopped. It is inevitable.

  2. It could be…We’ll see



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