Bitcoin’s “mega-rich” whales are an endangered species

Key facts:
  • As whales fall, Bitcoin’s “dolphins” and “sharks” are on the rise.

  • Owners of small amounts of BTC could total more than whales.

The bitcoin (BTC) ‘mega-rich whale club’, owners of more than 10,000 BTC, is disappearing. Right now, those entities have around 3.75% of the total supply of coins in existence, according to data published by market analyst and blockchain data Willy Woo.

Through a thread on Twitter, Woo presented an analysis on the distribution of BTC in the time. The big conclusion of that study is that “the currencies move towards the masses”. In other words, more and more entities have bitcoins. What does decrease is the average amount of BTC in the hands of each of them.

In his messages, the analyst highlighted that the data is based on unique entities and not on addresses, since each individual can have an infinite number of addresses. “Addresses are grouped forensically to resolve to individual participants,” he added.

Whales normally distribute coins while taking profit on bullish market runs, Woo explained. But seen in the long term, in general, whales tend to decrease, as shown by the graphs shared by the researcher.

Bitcoins in the hands of whales and mega whales are in decline. Source: @woonomic.

The “minnows” eat bitcoins from the whales

The data shows that as the largest whales become less and less common, “minnows,” as it refers to owners with less than 10 BTC, already accumulate 13.6% of bitcoins On circulation.

Woo argued that this class of owners could outnumber whales in percentage of coins (entities with 1,000 or more BTC), which have a total of 26% of the supply.

Although the so-called “minnows” have half of those bitcoins, in percentage, the picture changes if the funds held by exchanges and investment funds are taken into account. Being entities that have custody of the currencies of thousands of users, in addition to their own, their ownership is also related to small investors. Adding up all those coins, there is more than 30% of the bitcoin supply.

It may seem that the “minnows” have nothing more than the crumbs that the whales leave behind. However, the long-term revaluation of the cryptocurrency causes the average BTC per user to be lower and lower, but greater its equivalence in fiat money.

Another recent investigation by Woo, reported in CryptoNews, places the current average between 0.25 and 0.69 BTC per head, clearly below the average of a couple of years ago, around 1 BTC.

Despite the decline in individual holding denominated in bitcoin, in dollars the figure has only increased. With an average of 0.69 bitcoins per person, average BTC holding exceeds $ 20,000, a figure that until December of this year had not exceeded a full bitcoin.

The Rise of the Bitcoin Dolphins and Sharks

Although the school of small fish is increasing, Woo considered that “the story for 2021 is the rise of dolphins and sharks«. That class of BTC owners, those who have between 100 and 1,000 bitcoins, shows a clear increase in recent times.

The student of Bitcoin metrics sees this growth closely related to the market entry of “high net worth individuals, family offices, hedge funds and smaller corporate treasuries.” These entities, he said, “absorbed much of the whale distribution.”

Dolphins and sharks are on the rise. Source: @woonomic.

Lost Coins, Saved Coins, and Spent Coins

From his calculations, Woo excluded coins known as property of Satoshi Nakamoto, pseudonym creator of Bitcoin. Nakamoto’s total coins equals 5.8% of the BTC supply, which would make him a mega whale if considered.

The exclusion of Satoshi coins occurs because it is about lost BTC, as Woo argued. The bitcoins of whoever created the cryptocurrency more than a decade ago have not moved after being mined, which added to Satoshi’s silence all these years gives the idea that these coins will not actually circulate on the network.

In fact, there are those who give up not only Satoshi’s coins, but all those that have not been moved in more than 10 years. As the graph of HODL Waves de Unchained Capital, we would be talking about more than 11% of total bitcoins out of circulation.

More than 11% of the bitcoins in circulation would be “lost” after spending more than 10 years without moving. Source: Unchained Capital.

That same graph also supports Woo’s appreciation of the behavior of whales in bull markets and how the accumulation of bitcoins is oscillating. During price spikes in market cycles, we also see spikes of younger coins (which have moved from their directions more recently), spent in a short time. On the other hand, when the price falls, the increase in long-term accumulation can be appreciated, with bitcoins that spend more time without changing hands.

Incorrect readings of the data affect the price of bitcoin

To conclude his analysis, Woo pointed to something that he has already pointed out insistently: wrong reading of Bitcoin blockchain data like this from the distribution, can cause uncertainty in the market. Consequently, market falls are generated that do not correspond to the reality of the fundamentals of the network, in his opinion.

As a sample of this appreciation, the researcher contrasted two graphs on the holding of bitcoins: one in the long term, based on entities; and another with a range of only one year and based on addresses (which, as we have pointed out, could belong to the same individual entity).

Looking at the short term and directions only, it would appear that there was a spike and sudden drop in savers with at least 1 or more BTC. This can lead to misconceptions about alleged massive liquidations from bitcoin owners, when in reality “the whales execute an orderly distribution in every bull market,” in Woo’s words.

That is, the whales are not selling all of their BTC, exiting the market entirely. Rather, they take profit chunks by selling just a part of their total bitcoin fund. The rest, they save in the long term.

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