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Sion Touhig / Staff


There's Something In The Whale Song

Joe Saz
04 December, 2018
3 min read

Why is so much Bitcoin moving as markets hit yearly lows?

When you see 60k Bitcoin moving across wallets, you have to stop and wonder what might be going on. With the twittersphere in uproar that multiple hedge fund managers are looking to liquidate positions, the overarching question is, does that play a role in this price action? Let’s take a look at a few scenarios:

Selling Like a Pro

If a whale is keen to sell Bitcoin, you can rest assured that it is moving from one wallet to another, as giving someone a cold storage device with the private key to a massive stack is too risky. Once a massive holder of BTC decides to sell, they either sell over the counter (OTC person to person) or on an open exchange.

Right now, with the technical picture so grim, I think it is more likely that sellers will need to dump on numerous exchanges to offload their holdings. This means that a whale with enormous BTC holdings is likely to spread the sale across multiple exchanges in order to put equal pressure on order books. This is done to receive as much of a constant price for their BTC as possible.

Let’s take a more in-depth look at this scenario and why distribution matters. 

An order book on an exchange is filled with limit-buy orders, which are often referred to as support. It's possible to have hundreds of BTC waiting to be purchased at lower prices or even thousands at certain price brackets, often with the most consolidation at round numbers like 50, 100, and 1000 increments. If an order book is full, it can absorb the selling pressure. There is, however, a breaking point. In this case, a whale's selling could drop the price through support, thus forcing them to sell at multiple lower prices instead of one. If a whale of 60k BTC wanted to sell on one exchange, such as Coinbase Pro, they would most likely push the price to zero relative to other exchanges and lose money in the process.

A distribution example would be to sell as much OTC as possible. Then once that avenue is exhausted, send 5k to multiple exchanges to sell simultaneously. At this point, selling 5k BTC on Coinbase Pro would assuredly push the price into the 2k territory as it would with other exchanges. This would trigger a selling frenzy as stop-sells get filled with the heavy downside action signalling to other traders the need to dump positions.

How to Get Away with Murder

There is potential that the selling pressure is coming from an individual looking to avoid the watchful eyes of a monitor like Chainalysis. If a bad actor steals a boatload of BTC, takes a ransom in BTC, or something of the sort, then there exists a trace of how the BTC is moving on the blockchain. The actor will then move the stack into a wallet that matches transactions. This way the BTC is harder to trace; the culprit can filter a sell, person to person, or possibly even on an exchange.

Personally, I don’t think a 60k BTC whale accumulated their wealth in a disreputable manner; it is more likely an early adopter. Even the billionaire Winklevoss twins only have 10k BTC, so this would have to be a super early adopter. We know the Tokyo Whale is out until at least next month, but there are still people in control of five-six figure BTC reserves.

Ask Yourself Why

Why would an early-adopter whale begin to sell funds at this magnitude? Well, not everyone wants to go down with the ship, and the technical picture for BTC and the rest of the crypto markets is quite grim. BTC doesn’t always follow the technical signs, but after the recent breakdown, we are definitely walking on eggshells. Getting into a cash position could be the best technical decision until after we establish a bottom and the market signals a reversal.

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