Bitcoin Has A "Whale" Problem: 1,000 Investors Control Nearly Half The Market

If Jay Gould were alive today, he would've traded bitcoin.

Perhaps the most blatant hypocrisy perpetrated by bitcoin evangelists is their insistence that bitcoin and other digital currencies represent a return to a truly democratic financial system beyond the control of banks and other special interests, where players small and large can earn enormous profits simply by HODLing.

Of course, this idealistic take couldn’t be further from the truth. As Bloomberg points out, the markets for bitcoin and most of its cryptocurrency clones more closely resemble the US equity market of the Gilded Age, where a handful of powerful traders and brokers colluded to move prices in their favor. And because securities laws at the time were virtually nonexistent, the big players minted suckers with impunity.

According to Bloomberg, about 1,000 so-called “whales” control 40% of the bitcoin in circulation, giving them unrivaled leverage over the broader market. And because there are no laws explicitly banning collusion in digital currency markets, only the most blatant pump-and-dump operations risk being prosecuted as fraud.

And with the price skyrocketing like it has in recent days, the incentive for these traders to begin taking profits has never been more pressing.

About 40 percent of bitcoin is held by perhaps 1,000 users; at current prices, each may want to sell about half of his or her holdings, says Aaron Brown, former managing director and head of financial markets research at AQR Capital Management. (Brown is a contributor to the Bloomberg Prophets online column.) What’s more, the whales can coordinate their moves or preview them to a select few. Many of the large owners have known one another for years and stuck by bitcoin through the early days when it was derided, and they can potentially band together to tank or prop up the market.


“I think there are a few hundred guys,” says Kyle Samani, managing partner at Multicoin Capital. “They all probably can call each other, and they probably have.” One reason to think so: At least some kinds of information sharing are legal, says Gary Ross, a securities lawyer at Ross & Shulga. Because bitcoin is a digital currency and not a security, he says, there’s no prohibition against a trade in which a group agrees to buy enough to push the price up and then cashes out in minutes.

As Bloomberg explained, the manipulation in bitcoin is extreme because many of the big players know each other from having been involved in the digital currency space since its infancy. Add to this the fact that the risks are incredibly asymmetrical – there’s tremendous upside in terms of profits if they can successfully pull it off. And the chances of them drawing the scrutiny of law enforcement are relatively low.

“As in any asset class, large individual holders and large institutional holders can and do collude to manipulate price,” Ari Paul, co-founder of BlockTower Capital and a former portfolio manager of the University of Chicago endowment, wrote in an electronic message. “In cryptocurrency, such manipulation is extreme because of the youth of these markets and the speculative nature of the assets.”


The recent rise in its price is difficult to explain because bitcoin has no intrinsic value. Launched in 2009 with a white paper written under a pseudonym, it’s a form of digital payment maintained by an independent network of computers on the internet‚ using cryptography to verify transactions. Its most fervent believers say it could displace banks and even traditional money, but it’s only worth what someone will trade for it, making it prey to big shifts in sentiment.

Case in point: Some of these so-called whales admitted in an interview with Bloomberg that they regularly incorporate what would in the equity market be considered material nonpublic information into their trading strategies.

Like most hedge fund managers specializing in cryptocurrencies, Samani constantly tracks trading activity of addresses known to belong to the biggest investors in the coins he holds. (Although bitcoin transactions are designed to be anonymous, each one is associated with a coded address that can be seen by anyone.) When he sees activity, Samani immediately calls the likely sellers and can often get information on motivations behind their sales and their trading plans, he says. Some funds end up buying one another’s holdings directly, without going into the open market, to avoid affecting the currency’s price. “Investors are generally more forthcoming with other investors,” Samani says. “We all kind of know who one another are, and we all help each other out and share notes. We all just want to make money.” Ross says gathering intelligence is legal.

And investors who buy into smaller tokens are at an even greater disadvantage.

Ordinary investors are at an even greater disadvantage in smaller digital currencies and tokens. Among the coins people invest in, bitcoin has the least concentrated ownership, says Spencer Bogart, managing director and head of research at Blockchain Capital. The top 100 bitcoin addresses control 17.3 percent of all the issued currency, according to Alex Sunnarborg, co-founder of crypto hedge fund Tetras Capital. With ether, a rival to bitcoin, the top 100 addresses control 40 percent of the supply, and with coins such as Gnosis, Qtum, and Storj, top holders control more than 90 percent. Many large owners are part of the teams running these projects.

Unsurprisingly, Bloomberg managed to find someone to defend the status quo: Whales won’t dump their holdings, this person argued, because they “have faith in the long-term potential of the coins.” This strikes us as a naïve assumption.

Some argue this is no different than what happens in more established markets. “A good comparison is to early stage equity,” BlockTower’s Paul wrote. “Similar to those equity deals, often the founders and a handful of investors will own the majority of the asset.” Other investors say the whales won’t dump their holdings, because they have faith in the long-term potential of the coins. “I believe that it’s common sense that these whales that own so much bitcoin and bitcoin cash, they don’t want to destroy either one,” says Sebastian Kinsman, who lives in Prague and trades coins. But as prices go through the roof, that calculation might change.

While the concentrated holdings of the modern bitcoin market should give potential investors pause, in some ways, it's not all that different from the modern equity market. As we pointed out back in September, the Bank of Japan owns a staggering 75% of the domestic ETF market. Increasingly, equity ownership in the US and around the world is becoming increasingly concentrated in the hands of central banks, sovereign wealth funds and the largest asset managers like BlackRock, Fidelity and Vanguard.

While the whales can exercise unrivaled influence over the price of bitcoin, they aren't the only players in the bitcoin market with a natural inclination toward self-dealing. As Bill Blaine pointed out, nearly every bank knows bitcoin's extraordinary gains are a crowd delusion fuelled by the extraordinary promise of free wealth.

Yet, many will be willing to trade and settle them for their clients – largely retail. So, while the bitcoin bubble has (for now) blessed hundreds of thousands of mom and pop investors with spectacular returns, these gains will only continue as long as the cartel allows them too.


wren J S Bach Fri, 12/08/2017 - 22:38 Permalink

Laws keep honest people from participating. The felons, it's business as usual. Better to have a free and open market than bullshit laws and totally fucked enforcement, oh, and politicized pathetic appointed judges.This isn't a post for BC, but it is a post calling the article BULLSHIT! Quickest way to become a millionaire is to run for Congress, but it couldn't be that our lawmakers are inside trading...

In reply to by J S Bach

greenskeeper carl 38BWD22 Sat, 12/09/2017 - 01:41 Permalink

Someone at work talking about it will probably be my sell point. Litecoin was up about 83% at one point today, so I sold enough to get my original stake out, left the winnings in there. The first BTC I bought was at 9-something. When it briefly touched 19, I tried selling enough to get the money I put into it out, but of course coinbase didn't function, so I couldnt do anything unitl it stabilized at around 16, so I just left it there. Im jus gonna see how all this plays out.

In reply to by 38BWD22

Gaius Frakkin'… DiotheDog Sat, 12/09/2017 - 09:02 Permalink

The truth is Bitcoin's market cap is still a fraction of USD or gold.No one cares about gold whales and despite all the rhetoric waged against billionaires most continue to use USD.Bitcoin has problems and the recent surge in value is one of them, but I fail to see it going away. The idea that cryptocurrency is going to disappear (with all the problems inherent with the USD and US economy getting worse everyday) is just absurd.When I see all the negativity against Bitcoin, I see butthurt goldbugs and petrodollar bankers throwing a tantrum.

In reply to by DiotheDog

Delving Eye Dorado Sat, 12/09/2017 - 12:10 Permalink

@GREENSKEEPER CARL: You told me exactly what I needed to know:"I tried selling enough to get the money I put into it out, but of course coinbase didn't function, so I couldn't do anything until it stabilized at around 16 ..."Yeah, if we peons buy BTC and then try to sell it at a decent profit, coinbase "won't function" until the whales take their profit and the price falls for the rest of us to minimally cash out. Thanks, Carl. I was thinking of buying a small amount of BTC, but your experience tells it like it is, and I'm out.

In reply to by Dorado

free_as_in_beer DiotheDog Sat, 12/09/2017 - 16:54 Permalink

I knew about mining before asics and rewards were easy.  I hate that i never mined any, but no way would i have held out for 19,000.its not a ponzi sceme, its a proof of concept for block chain security. It has the same value as beanie babies.  The question is not how high will it go, it is when will there be enough hash power to render the whole thing worthless.

In reply to by DiotheDog

LyLo greenskeeper carl Sat, 12/09/2017 - 09:09 Permalink

...  Well, in that case, I got some really baaaaad news.See, I have several friends that are the definition of dumb money: they often come to me because they literally do not know what the words used even mean.  (Bear in mind, my confidence level is, "I read ZH, so know what the words mean.")  Many of them drive very nice cars, have very nice cell phones, very nice shoes...  And are single living with mom and dad, because they have temp jobs and know that at any moment they could not be able to pay rent.  (Yeah.  I know.)They are all now heavily invested.My parents like to watch Rachel Maddow and MSNBC.  They aren't very good at investing, and have lost their initial investments every recession that has occurred in their lives.  They usually don't buy until they see everyone around them making money, then they get jealous and buy then everything crashes and they sell.They are looking at buying bc.My husband works in tech, so a lot of the people around him are very quick and well versed in this type of stuff...  But you guys remember the dude at Google?  So yeah: not everyone in tech is...  competent.  The real techies there have been in the coin markets for a while now, but the idiots that keep their jobs exclusively by affirmative action are now talking about it and buying in.  My husband had to explain to a single mother the difference between different coins, as she wasn't sure what she wanted to buy.So even the complete morons that staff the front desk are buying in.But you know, do whatever.  I'm sure whichever coin you prefer truly is the future of all money or something.  (I just wanna know what happens to the 1500 other coins that aren't the future, and all those investors...)

In reply to by greenskeeper carl

greenskeeper carl LyLo Sat, 12/09/2017 - 10:52 Permalink

I've said from the beginning that I fully realize I'm just gambling here. I'm not saying anything I own is the future of money. The thing with gambling is you might lose everything. I may well be among the 'dumb money' crowd buying in late the the rally, but I'm not a dumb gambler. I don't bet anything I can't afford to lose. Im doing it for fun, and because I think all this is interesting. If bitcoin goes up another 30% or so, I'll be able to get my original stake out after doubling it, and I will remove that amount of money, plus just enough to buy a 5 ounce bar of silver so that no matter what happens, I can pull that out and say I made a little on all this. If bitcoin tanks and I get wiped out, well, that's gambling. But if it keeps going up to a half million so John mcafee doesn't have to eat his own dick, I'll be a very happy man. People throwing all their money into this when they don't understand any of it are stupid, to be sure. But are they any more stupid than people buying any of the FANGs at this point?

In reply to by LyLo

zebra77a bobcatz Sat, 12/09/2017 - 03:49 Permalink

The big dirty secret is Central Banks are buying bitcoin with both fists. China, Russia and India - Brazil were all working hard (throw in Iran) to kill the Petrodollar, by creating an alternative to the US dollar for oil trade.They have been able to  fragment the all mighty petro-dollar by diverting GDP away from the US dollar but none of them were able to stop bitcoin..Bitcoin will  become the new world reserve currency or world reserve store of wealth as governmental and central bank control over gdp is about to evaporate. They slug out amongst themselves to determine who gets to tax the plebs..In the past - only the ultra wealthy could escape their wealth to offshore accounts  in the past -  It was allowed people of deep resources. Now someone with $10 can encrypt and drift their money away from collective taxation through a couple exchanges and back to a cold paper wallet..If anyone thinks the central banks are not panicing  - fearing a bank run yesterday I tried to buy a small amount of btc through Coinbase to discover Canadian banks were silently blocking money to the exchange, and confirmed it with news articles...  Coinbase is one controlled exchange that is also 'collecting' as much bitcoin as possible blocking transactions out. But there are 50 exchanges around the world, and anyone can run the full coin wallet becoming a processing node for a small 200 GB download of the blockchain...Brazil's strategy is adopt a national cryptocurrency they they can control and dilute before bitcoin evaporates their GDP to offshore exchanges, as power demand skyrockets as people advantage themselves of free socialist power to setup mining rigs through the country.  I expect power outages soon.Market cap climbed in bitcoin $100 billion in a week that eclipses your Warren Buffet and Bill Gates.  They don't have the money - whose left - The central banks..There are $500 trillion in derivatives in the world -  the federal reserve printed up $16 trillion in 2007/8 to loan banker friends in europe just cause. For them to print up $ Trillion (now) to buy bitcoin is nothing to them.. Even if one trillion flows into 4 million active trading bitcoun thats $250,000 a coin. If world GDP begins to circumnavigate taxation with large amounts say $10 Trillion flowing into bitcoin it will easily hit $2,500,000 a coin - $10,000,000 a coin, and at some point the herd is going to stampede their money out of the fiat and into bitcoin..  World currencies could hyperinflate against bitcoin the one solid fixed encrypted rock of limited production.Banks will loose fractional reserve liquidity and fail seizing bank deposts and  causing stock markets to collapse.  People will default on fiat in the millions only to have their seized properties bought back as GDP shifts to bitcoin, and less people trade in fiat.Houses in Vancouver are already being bought and sold to the Chinese in Bitcoin.  Were not talking pizza were talking multi-million dollar properties.  That's a LOT of GDP escaping from socialist taxation..Strap yourselves in folks .. This ship has barely launched..

In reply to by bobcatz

zebra77a God Emperor Sat, 12/09/2017 - 04:11 Permalink

Get back to me when it crosses $50,000 before the end of 2019... It's already unstoppable.  After $50,000 it's only a matter of waiting for Amazon to list product in Btc. When you see 0.00000029 Btc for an apple at your grocery I suggest closing your fiat account out asap..Bitcoin miners are already estimated to be using more power consumption than 150+ countries: ~30 TWh or 0.19% of world  electricity production is going into mining bitcoin.

In reply to by God Emperor

zebra77a Arturo Sat, 12/09/2017 - 04:54 Permalink

Then Amazon will be replaced to the Ebay, or the Kijiji, or Craiglist (which is now pricing their stuff in Btc).   There will be a niche demand for products priced in Btc, and this will grow exponentially as new millionaires in Btc are looking for a place to spend it but do not want to bring it back to fiat.. This will not be stopped.   Bitcoin offshoot cryptocurrencies that are faster and more efficient will also capture the house junk..  Like Airmiles, pretty soon ALL online selling sites will probably launch their own localized cryptos.  Bitcoin will BE the primary store of wealth - like a super bank vault store value, becoming the World Reserve Currency or World Reserve of Value (WRoV).  Knockoffs will capture offshoot localized selling of beanie babies and what have you.People will dispense a tiny amount of bitcoin back as required, and by the comments to this page this is already happening..A single bitcoin will afford you - your retirement by 2022 this is really going to happen...Craigslist goes Crypto :

In reply to by Arturo

Matt Arturo Sat, 12/09/2017 - 12:02 Permalink

Yeah, bitcoin is on track to become Blythe's Hyperledger, soon all it will be good for is settling the day's difference in trade between two countries with one transaction. Even then, it will soon be taking tens of megawatt hours of electricity per transaction. Bitcoin is an interesting combination of some really good ideas and some really bad ones. 

In reply to by Arturo

pitz zebra77a Sat, 12/09/2017 - 04:13 Permalink

"Houses in Vancouver are already being bought and sold to the Chinese in Bitcoin." Making things up I see.  Vancouver housing is transacted mostly in extreme amounts of credit.  Bitcoin or even foreign cash is not involved.  There's no data to support such assertion.

In reply to by zebra77a

zebra77a pitz Sat, 12/09/2017 - 04:30 Permalink

Dubai project to be priced in Bitcoin.Dubai :… House For Sale In Bitcoin A Sign Of Suspicious ActivityVancouver :… for sale in bitcoin on Craigslist upsets Realtor… Real Estate dollar property in Washington - being sold for bitcoin:… York Real Estate Brokerage to start accepting bitcoin Cities that let you buy property with Bitcoin… Million pound property for sale in London (for bitcoin)… Million dollar property for sale in Flordia - Bitcoin accepted… Million dollar property to be launched in Bitcoin… buying property in London Bitcoin Accepted (2014!)… selling propery in Shanghai for bitcoin (2013!)…

In reply to by pitz

centipede zebra77a Sat, 12/09/2017 - 08:15 Permalink

You my friend are delusional. You do not realize one basic substantial fact. Bitcoin is easily replaceable by zillions cryptocurrencies using the same algorithm only with different names. That is exactly the fundamantal difference in comparison to commodity currencies like gold, silver .... Those are not replaceable with their unique properties and usabilities for us. Just imagine what is easier to replace. The bitcoin mania will end up in the same way as the tulip mania. Some will get rich for sure but most will lose everything they invested in bitcoin.

In reply to by zebra77a

Jay centipede Sat, 12/09/2017 - 10:14 Permalink

If I rake up a pile of rocks and offer them as money, is that inflationary to btc? No. My pile of rocks will never gain any traction as money. Same with the 1300+ alt coins out there. Out of the vast ocean of shitcoins there are only a handful that offer unique technology or a unique use case that btc doesn't. Those handful of coins will survive. The rest will die.

In reply to by centipede

Dorado Jay Sat, 12/09/2017 - 10:24 Permalink

Precisely why Ether will come to dominate as a crypto *currency* used to transact in retail & business.  Bitcoin got there first but isn't really good for much other price speculation (eg gambling) or buying drugs."Investing" in Bitcoin isn't investing in blockchain technology. 

In reply to by Jay

Matt centipede Sat, 12/09/2017 - 12:06 Permalink

You don't undserstand Tulip Mania. It lead to the incredibly useful technological breakthrough of cloning plants, without which we wouldn't have bananas. Bitcoin Mania will leave us with hopefully the more useful aspects of distributed public ledgers, while shedding the insanity of competitive payment processing.

In reply to by centipede

zebra77a zebra77a Sat, 12/09/2017 - 04:44 Permalink

As I expected and predicted : Capital controls will not stop Bitcoin.  There is <too much wealth> for bitcoin to be stopped now.China the largest communist bloc in the world shut down Bitcoin Exchanges in September. By December (3 months) they  are popping back up in Japan.  Peer to peer transactions bypassed the shut down Chinese exchange.  If Japan now tries to shut down the exchange it it will come back in the Seychelles, or Cayman Islands, or Qatar.One of the world’s largest bitcoin exchanges is coming back to life…

In reply to by zebra77a

Thom Paine zebra77a Sat, 12/09/2017 - 05:17 Permalink

This is to get hot money out of China.They couldn't spend it in the country or accumulate assets in China as they then would have to explain it.This doesn't help the local bitcoin holder, unless they want have their money an assets out of the country.Else they will have to explain to the IRS, and pay captial gainst tax.Capital contorl will certainly work on the domestic population, not so much on corporates, if they want to use bitcoin for nefarious purposes, else they don't need it since they own congress in anycase.

In reply to by zebra77a

CJgipper zebra77a Sat, 12/09/2017 - 08:19 Permalink

total market cap is barely even one of the banks or big retailers, and central banks are buying "with both fists".  I think not.  If central banks were buying with both fists, BTC would be 1M each.  It has to go to 60k JUST to make 1T market cap.  That's less than the FED buys of tbills in A SINGLE YEAR.   Your sense of scale is way, way off.

In reply to by zebra77a

FreeNewEnergy CJgipper Sat, 12/09/2017 - 09:18 Permalink

You are a denier.With the rate of adoption and growth, Bitcoin will probably surpass your $60,000 mark in mid-March, if not sooner.Sure, it's in a mania phase right now, but, do you not remember the birth of the internet, CD players, personal computers, or just about any technology in use today? All experienced a mani stage, in which adoption was quick and massive. Bitcoin is only different in the regard that as its adoption accelerates, so does its price.Or, you can remain in fiat dollars, yen, euros or gold, silver, platinum. Like any "investment advisor" (and I use that term with a good dose of skepticism) would tell you, "diversify." Hold some stocks, bonds, gold, silver, crypto, cash (in multi-currencies), real estate, art, collectibles, machinery, etc., and play what's emerging as a new game in the monetary/financial realm.Bitcoin is just another asset class, albeit a red-hot one at the moment. How many people laughed at Apple computer back in 1986? They're not laughing anymore. Rather, they're likely complaining about Bitcoin to their friends on an iphone or mac computer.

In reply to by CJgipper

centipede FreeNewEnergy Sat, 12/09/2017 - 09:34 Permalink

Bitcoin is not just another asset class. It is not an asset st all, only a speculation. It is just an illusion of an asset. All bitcoin worshipers are delusional if they think otherwise. They do not realize one basic substantial fact. Bitcoin is easily replaceable by zillions cryptocurrencies using the same algorithm only with different names. That is exactly the fundamantal difference and the flaw in comparison to commodity currencies like gold, silver .... Those are not replaceable with their unique properties and usabilities for us. Just imagine what is easier to replace. The bitcoin mania will end up in the same way as the tulip mania. Some (few) will get rich for sure but most will lose everything they invested in bitcoin.

In reply to by FreeNewEnergy

Save_America1st Antifaschistische Sat, 12/09/2017 - 00:46 Permalink

what if a bigger problem is on the horizon? What if oil exporting countries start demanding bitcoin for oil?  Hmmm????then what, bitchez?just sayin'...And by the way....ummmmm....Bloomberg??????   Are we really going to take anyone from Bloomberg seriously in anything they say?????  I would fucking hope not.  This article and it's theory on these guys selling off big-time to take "profits" is total bullshit.  Oh maybe they'll skim a little here and there, but nothing significant.  They're aren't fucking stupid.  They know this is still just the very beginning.  And it is...And another thing....where exactly is this "pump and dump"?  In the last 12 months BTC has gone from like 900 per to touching 18,000+ yesterday and now at 16,000.  That's not a pump and dump. This is still the beginning...this is pretty much still the first batter in the first inning of the fucking ball game, bitchez.  So deal with it. Over the same 12 month period, Ethereum has gone from like 9 bucks to nearly 500 per.  And in the same 12 months Litecoin has gone from 3.50 to now nearly 200 a few minutes ago before dipping back to the 160's.  Ooooooohhh...big deal!  Is that a pump and dump? oooops...Litecoin just as I wrote that jumped back up over 180 per and will most likely blow 200 per away next week if not in the next hour or two.I'm thinking this is because of the start of the bullshit futures paper crap that's going to start over the next couple weeks with BTC.  Yet BTC is still holding very strong right now around 16,000.I think the "dump" in BTC will probably occur somewhere around 1 million per BTC.  Edit: that point though, nobody is going to want dollars or any other fiat for BTC or any other crypto digital that has survived to that point.  We probably won't even talk in terms of dollars or other fiat compared to BTC or other cryptos at that point because they will have completely taken over the global monetary system and dollars will be a thing of the past along with all the other worthless fiat.Maybe we'll be talking more like BTC compared to ounces of gold and/or especially silver???  Ya never know.  So if I were you all I'd still keep stackin' mad piles of shiny phyzz along the way.  Skim some BTC and other crypto profits on the way and git you more phyzz.  

In reply to by Antifaschistische