Follow The Whale?

Do not read this article if you're not open to any criticism on one of our favorite subjects, namely cryptocurrencies. One harsh fact to reckon with is that, up until now at least, bitcoin and its offspring of many thousands haven't made good on their promise of creating a alternative economy that's not plagued by the main problems we see in traditional economies.

What makes this even more disappointing is that the traditional problems were the reason for embarking on this digital revolution in the first place. Right now it would be wise to insert that many of the problems I'm talking about here are easily explained by the fact that this experiment is still very young, and that many were expected beforehand. With tens of thousands of tokens, coins and projects in a mostly unregulated market, it's only to be expected that many of them will be scams; complete freedom in this market is akin to a digital wild west.

This is not a problem for us crypto-heads of course, because we know that with great freedom comes great responsibility. But among our ranks are also the ones who know very well that most people aren't ready yet to participate in this realm of freedom and responsibility, and will abuse that knowledge to line their own pockets at the expense of those newcomers and the respectability of and trust in this new domain. They give our favorite playground a bad name is what I'm saying, and constitute a serious bump in the road to mainstream adoption.

Consider, if you will, this quote:

If someone can sell you a $500 shirt, they can sell you a $30 bottle of "special" water as well. Remember, just because something is for sale, it doesn't mean it has any value whatsoever. Things that are for sale, are for sale because people buy them. If there are enough people that want to buy some useless thing, someone is going to sell that useless thing to those people.

This quote, you'll be happy to hear, does not originate from our playground of digital money, but from the traditional economy. Scams are everywhere and by no means exclusive to the realm of cryptocurrencies. Even in the highly regulated traditional economy there are plenty of loopholes and opportunities for scumbaggery. It's just that scumbaggery is far more prevalent in new, unregulated markets. Our shared dream is that regulation won't be necessary at all, for many reasons.

I submit to you that one of the main reasons is because we've seen what regulation amounts to in the traditional economies. I use plural here because this applies not only to the neoliberal capitalist world of today, but almost every socioeconomic configuration known to mankind, whether it's feudalism, slavery, state communism, mercantilism, you name it. They all have one thing in common; after a while most wealth and power is concentrated in the hands of a few privileged individuals, and the rules are made by those privileged individuals, concentrating even more power in their hands.

If our new digital shadow-economy would have been successful, the term "whale" wouldn't be so dominant in our vocabulary, now would it? Unfortunately it is, and the whales are real. Heck, I myself am a whale! Well... Not really; I'm classified as a whale on Loop Community for owning more than one million loopr tokens. That doesn't make me rich and doesn't qualify me as a whale in the real sense of the term. A whale is a person who owns enough cryptocurrency to they have the potential to manipulate currency valuations. Here's what Investopedia has to say:

Whales can be a problem for bitcoin because of 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.
_{source: Investopedia}

Of course this goes for any cryptocurrency, but because bitcoin is our oldest and most trusted project, we must readily admit that our digital shadow-economy has its own market manipulators to contend with. In the same Investopedia article we learn that as of Q2 2021, the top 100 wallets held some 18 percent of all bitcoin valued at around $150 billion. It has to be said though that among them are the wallets from large exchanges like Binance and ByBit as well.

Still, the problem of concentration of wealth and power isn't solved, which is a bummer as bitcoin was launched as an answer to the 2008 financial crisis, which was caused by deregulation of the traditional financial markets and its largest players. Or should I say: largest scammers? At least we'll be spared what happened next: our economy has no centralized power that can declare its largest players "too large to fail" and demand we pay back their losses, which is what happened in the traditional economy.

I'll end on a positive note though. I already said that we're still very early, and that we have the potential to automate, in a democratic fashion, minimal regulation through smart contracts. We have programmable money, and it's up to us pioneers to make sure we endow that money with code that makes it private, peer-to-peer and as fair and decentralized as possible. That way I believe we can avoid the need for regulation, if only our governments will permit. And also if they won't, because the cat is out of the bag, we're here to stay. It's also up to us to spread the gospel of responsibility that comes with the freedom we offer in our playground because no amount of programming will annihilate all scams; it's a fair price to pay for the opportunities given to us all.

Last but not least, our economy is transparent, which comes with the advantage that we can all see the transactions of the whales. I was inspired to write this post by the below linked video which shows us the behavior of some of the most successful bitcoin whales. Now, this isn't financial advice of course, but some of them purchase bitcoin near or at the local bottoms, and sell near or at local highs. This is suspicious, unless we account for the possibility that, as stated above, these same whales may themselves be responsible for creating these lows and highs. I'm not saying that you should copy their behavior; you draw your own conclusions and Do Your Own Research! And remember: past performance is no guarantee for future results! If you, after ample consideration, still want to take a cue from these whales, the list can be found at the Bitcoin Rich List...

Thanks so much for visiting my blog and reading my posts dear reader, I appreciate that a lot :-) If you like my content, please consider leaving a comment, upvote or resteem. I'll be back here tomorrow and sincerely hope you'll join me. Until then, stay safe, stay healthy!