The Whales of Bitcoin: Can They Tank the Market?

In the world of Bitcoin, mysterious “whales”—individuals who own large hoards of the digital currency—have long been a source of speculation and anxiety. Now, new research sheds light on the identity of the whales and their impact on the market.

A study by the crypto forensics firm Chainalysis examined the 32 biggest whales, who together hold a little more than 1 million of the approximately 17 million Bitcoins mined to date. The smallest whale in the sample holds around 12,000 Bitcoins while the biggest holds more than 85,000 Bitcoins—respectively worth $75 million and $541 million at recent prices.

As the chart above shows, the firm classified the 32 whales into four categories. These include three “criminal whales” who made their fortune years ago when Bitcoin was best known as a currency to conduct illegal transactions on the Internet. Chainalysis suspects that one of these whales is currently in prison.

For investors, though, the most intriguing category will likely be the nine “trader whales” who entered the Bitcoin market in 2017, and who have been actively buying and selling. According to Chainalysis economist Kim Grauer, contrary to popular perception, the trader whales have typically been buyers not sellers when Bitcoin’s price dips and there is no evidence of them acting in concert.

This undercuts the suspicion of many Bitcoin watchers that shadowy whales are manipulating prices. The Chainalysis findings about the trader whales, three of which only trade on Asian exchanges, also highlights how there are relatively few of them. Grauer says that many Bitcoin wallets that appear on Internet “rich lists,” and are the source of intense speculation by amateurs, are not whales at all. Instead, they are balances held by exchanges and other commercial institutions in the course of their day-to-day financial operations.

The other two whale categories do not have the same presence on the market as the trader whales. The “miner whales” are individuals who amassed large quantities of Bitcoin at a time when it was easy and inexpensive to mine (though some may have received it by means other than mining). Chainalysis says they sell portions of their stash but only rarely and this group is inclined to hold (“HODL” in Bitcoin parlance) it for the long term.

The five “lost whales” are individuals who amassed large quantities of Bitcoin in the early days but, based on a total lack of wallet activity, have likely died or lost the key to their wallets. As Fortune reported last year, a study by Chainalysis concluded that nearly 4 million Bitcoins, of a total supply that will one day equal 21 million, are lost forever.

To identify the whales in its study, Chainalysis did not simply look at wallets holding large amounts of Bitcoin. Instead, the company applied what it calls a “co-spend” analysis to Bitcoin’s public blockchain ledger, which let it identify clusters of wallets that appear to belong to the same individual.

Chainalysis’s whale study comes with some important provisos, says Grauer. This includes the possibility of some whales with multiple wallets being sneaky enough to avoid the company’s co-spend detection.

The most significant proviso is that the study doesn’t include the biggest whale of all: Satoshi Nakamoto, the pseudonymous founder of Bitcoin. Satoshi’s fortune, scattered across many wallets, amounts to more than a million Bitcoins, which Chainalysis presumes to be lost forever.

The bottom line? The role of whales in the Bitcoin market may be overstated. The top 32 whales control around 6% of the supply, but that figure drops to 4.6% when lost Bitcoins are taken into account. More importantly, only a minority of these whales are regularly active in the market and, when they are, they appear to behave in ways that supports the long-term value of Bitcoin.