A new report suggests that as much as 80% of the world’s wealthiest holders of Bitcoin are simply keeping coins out of circulation and waiting for the value of them to go up. Less than 20% of the coins higher net worth individuals hold actually gets used for trading. This speaks to the fact that more and more crypto investors are treating Bitcoin like gold rather than digital money. Let’s look more at the reasons why and whether the fact that this is even happening is a good or bad thing for crypto adoption.
Why Whales Treat Bitcoin Like Gold
Crypto whales treat Bitcoin like gold for one simple reason. The exponential growth potential is incredible. Even though the digital currency market is very volatile in comparison to other asset classes, whales typically have at least some of their wealth, if not most of it, in other assets so that they can hedge their bets if something goes wrong. The average investor has to keep this in mind. While most of us play with a few hundred or may be a few thousand dollars’ worth of crypto, and perhaps not all of it is in just Bitcoin, heavy hitters are doing the same thing. The reality is they’re just doing it on a larger scale.
How Much Bitcoin Are Whales Keeping?
An analysis of Bitcoin’s blockchain shows that 60% of Bitcoin’s total coin supply is in the hands of people who are selling less than 25% of their holdings. This is definitely an indication that the rich are getting richer.
What it also means is that although Bitcoin’s volatility is slowly but surely calming down over the years, it’s far from a stable asset. Think about it logically. All it takes is for a few whales to sell a large amount of coins for the price to drop dramatically. The average investor who isn’t a whale and is only speculating on the price of Bitcoin is likely going to continue to be a victim of market manipulation because of all this. The most unfortunate part is that the average person is playing with much less than a whale who might own say 100 Bitcoins.
The fact that so many coins are in the hands of so few investors is all the more reason to try and diversify, if not across different asset classes, at least across different coins.
The Halving Is Making Whales Hold on Even More
Here’s the problem for the small-time player that hopes buy low and sell high. The halving event that cut down the Bitcoin mining reward to 6.25 bitcoins per block is actually making whales more inclined to keep holding on to their investment. In order for big timers to consider selling their holdings, the price has to appreciate to a level that would force venture capitalists and institutional investors to take profits. Even then, what happens next in the market might make the $3,100 price the market saw in March as a result of the coronavirus pandemic seem like a distant dream.
At the present moment about 1.8 million coins are exchanging hands each week. Most of that volume comes from four different platforms: Bitfinex, Binance, Coinbase and Huobi. If that tells the novice investor anything, they now know exactly where most of the volume is. That’s handy information for when the price is going up and down and users want to place bigger orders. Still, it’s important to keep in mind that investing in Bitcoin is exactly like gambling with it. Be mindful of your bankroll and only play with what you’re willing to lose. In other words, act like a whale, even if you’re not one.