Closer scrutiny at data from Bitcoin Holdings shows a potentially disturbing pattern among unidentified accounts: a rising volume in consolidation from large crypto owners.
Investors with 1,000 to 1 million Bitcoins that are often referred to as "whales" hold 42 percent of all Bitcoin supply, up from 37 percent two years ago during the height of the speculative bubble, according to researchers Coin Metrics.
Although small retail investors trickled in during and after 2017 boom, spending a few hundred or thousand dollars, the increasing the concentration of ownership means that the swaying big holders are likely to rise over rates. According to Flipside Crypto, only around 3.5 percent of all addresses are actively trading on any given week.
They Who Control The Price
"The issue with a few big players owning crypto is that they can easily push down the price once they sell, which makes the market vulnerable to rapid swings," said John Griffin, a finance professor at Austin University of Texas, who has published research on cryptocurrency market manipulation.
Overall, according to Flipside, the top 1,000 addresses hold 35 percent of all Bitcoin available, up slightly from 34 percent at the end of 2017. In the meantime, as of September, more than 27 million wallets kept a balance of fewer than 10 Bitcoins per TokenAnalyst researcher.
Much of the recent accumulation probably occurred among investors not wedded to the Bitcoin vision, cautioned Aaron Brown, a Bloomberg Opinion investor and blogger. Family offices and high net worth individuals are likely to hold the top 10,000 to 100,000 addresses that may not hang around if the coin does not succeed, he said.
Such addresses now account for 15 percent of the supply of Bitcoin, Brown said, up from just 18 months ago to 10 percent.
The Silent Operators
"I doubt that they have unlimited endurance, and I would expect them to quietly withdraw to pursue other innovative innovations without significant growth in actual usage," Brown said. "We have no great financial or political commitment to either cryptography or the principles and technology behind it."
The wild price fluctuations of Bitcoin preclude broad commercial acceptance of the coin. Bitcoin remains one of this year's top returning financial capital, almost doubling to about $7,180 amid unexpected price fluctuations. That's on the heels of the 74 percent decline last year and the 1,400 percent increase in 2017.
"Bitcoin will remain volatile," said Eric Stone, Boston-based Flipside head of data science. "The currency is owned by a few really big wallets. Marketplaces of exchange are unregulated and not audited. So there's only a lot of potential to do that for someone who wants to manipulate the market."
