The likelihood of a strong price movement caused by the sale of a large quantity of Bitcoin will increase as its price continues to rise. As digital currency is gaining popularity and acceptance by the general public, small investors need to be aware that a large number of Bitcoin belong to a very small number of people.
According to Bloomberg, up to 40% of the total amount of Bitcoin, currently 16.7 million pieces, is owned by about a thousand people. This means that each of them could hold more than 6,700 Bitcoins, which, at the present value, would have a staggering value of $ 110 million. As the price continues to rise, there is more chance that some of them want to withdraw money and benefit from it. It is also very likely that they acquired their cryptocurrency when it was worth a fraction of its current value, which is even more reason to sell it.
Bitcoin was created and developed by a small, tightly knit community of technology gurus and entrepreneurs. Satoshi Nakamoto remains anonymous, giving even more weight to the notion of a group of people controlling a substantial part of Bitcoin.
It is possible that these Bitcoin whales know each other and may eventually coordinate their sales strategies to maximize profits. When Roger Ver was asked if Bitcoin whales could work together in this regard, he told Bloomberg:
I suspect that's probably true, and people should be able to do what they want with their own money. Personally, I never had time for things like that.
Because Bitcoin is a currency and not a security, there is no regulation that prohibits trading as a group to manipulate market prices. In fact, this already happens with altcoins where groups select those that are actively publicized on social networks, such as Reddit or Facebook groups, which results in a rise and fall (pump and dump). A false rise in prices where people buy for fear of running out (FOMO, Fear Of Missing OUT), then the consequent liquidation, which restores the value of the asset to what it was before.
Ethereum faces a similar problem of ownership, with its creator Vitalik Buterin holding about 525,000 ETH with a current market value of about $ 240 million. Alex Sunnarborg, co-founder of Tetras Capital, says that the first 100 Bitcoin addresses control 17.3% of the total currency issued and that the top 100 Ethereum addresses control 40% of the total supply.
However, the dominance of the market by a minority of whales is not new. The banking sector has seen similar actions for decades, while the bigwigs at the top are developing at the expense of the majority. With cryptocurrencies, however, this may be less likely since founders and big holders are more ideologically oriented, which in theory makes them less likely to manipulate markets for their own profit.
@nashbe Thanks !