【ChainNews Highlights】Bitcoin whales see first increase in four years, while average wealth slightly decreases.

The number of Bitcoin whales and the total amount of Bitcoin they hold have increased for the first time since 2016. New whales have been transferring Bitcoin out of exchanges since "Black Thursday" on March 12, which may explain why the average wealth of whales has decreased.

Original Title: "New Bitcoin Whales: Where Are They Coming From?"
Written by: Liesl Eichholz
Translated by: [Translator's Name]

Since 2016, the number of Bitcoin whales has increased for the first time, but the question is: where are these new Bitcoin whales coming from? Are they looking to hoard more Bitcoin than ever before?

Since the last halving of block rewards in 2016, the number of Bitcoin whales has been on the rise again, with the trend of increasing whale numbers starting in January 2020.

To better analyze the trend changes, we define "Bitcoin whales" as entities with at least 1000 BTC in their account balances, so this metric does not refer to the number of addresses with at least 1000 BTC but to the number of entities. Additionally, unless otherwise specified, all analyses in this article do not include exchanges.

Using a clustering-inspired analysis method, we found that the number of Bitcoin whales has increased to over 1800, possibly surpassing previous historical highs.

However, where do these new Bitcoin whales come from? Does this growth in numbers mean that whales are accumulating more Bitcoin?

Yes and no.

Although the proportion of Bitcoin held by whale accumulations is increasing in the total Bitcoin supply, this growth trend is not very pronounced, and it could continue. At the same time, some individual Bitcoin whales have not become wealthier.

Investigating the "Market Dominance" of Bitcoin Whales

In fact, over the past five years, the amount of Bitcoin held by Bitcoin whales has been steadily decreasing, from an initial approximately 6.7 million BTC to about 5.2 million BTC, a decrease of over 22%. However, with more entities crossing the threshold of Bitcoin whales, the situation in 2020 seems to have changed.

If we extend the timeframe and look at the entire history of Bitcoin, we will see that the balance of BTC held by whales peaked in early 2016 and has been declining continuously since. Although the number of BTC held by Bitcoin whales increased in 2020, it is still far from the peak value reached in 2016.

However, to evaluate the overall dominance of whales in the Bitcoin market, we must consider a fact: in the early years, the total supply of Bitcoin was relatively low, so at that time, whales could easily dominate the market (meaning that the proportion of BTC held by Bitcoin whales was very high compared to the total BTC supply), and this market dominance continued for a considerable period.

In the following Figure 4, we find that although the balance of BTC held by Bitcoin whales peaked in 2016, their market dominance actually formed and peaked from early 2011, but has been in a nearly constant decline since. This means that although the recent market dominance of Bitcoin whales is declining, this change does not seem to have affected the Bitcoin price, especially in the past decade when the price of Bitcoin has continued to show a steady upward trend.

So, what does this trend change mean for the wealth of Bitcoin whales? We know that although the proportion of the Bitcoin market "cake" held by Bitcoin whales is slowly increasing, it is becoming smaller, but at the same time, the "Bitcoin cake" is also getting bigger over time, so we need to carefully analyze to understand how much wealth the Bitcoin whales actually represent.

Bitcoin Whales Hold More Bitcoin, But Not as Wealthy as 2017

Although the number of BTC held by Bitcoin whales has increased recently, as a whole, they may not be as wealthy as before (in terms of USD). From the figure below, we can see that the USD value of BTC wealth held by Bitcoin whales peaked at the end of 2017.

It is easy to understand that the total USD value of BTC held by Bitcoin whales is highly correlated with the price of Bitcoin. However, although the balance of BTC held by Bitcoin whales has gradually decreased in recent years, the total USD value of BTC they hold has started to recover, especially recently, and even shows a reversal and increase (as shown at the end of the trend chart above).

If the number of Bitcoin whales continues to increase at the current rate, we should see the total USD value of BTC they hold surpass the level of June 2019. However, it may be difficult for the total USD value of BTC held by Bitcoin whales to reach a historical high. Since the number of Bitcoin whales may not significantly increase in the short term, achieving this goal can only rely on a rapid increase in the price of Bitcoin, and the current trend in the Bitcoin market does not seem to support a level higher than the bull market in 2017.

New "Bitcoin Whales" Are Mostly Small "White Whales," Not Large "Blue Whales"

If we consider Bitcoin whales as a whole, the wealth they are accumulating is indeed increasing, but not every Bitcoin whale is making money; in fact, some individual whales are becoming poorer. Although we saw an increase in the number of Bitcoin whales in 2020, the average balance of BTC held by Bitcoin whales has been decreasing since 2011, making the increasing trend in the number of Bitcoin whales seem meaningless.

ChainNews Note: The average balance of BTC held by Bitcoin whales refers to the average BTC wealth each Bitcoin whale holds.

This trend suggests that although we see many "whales" in the Bitcoin "ocean," most of these whales are small "white whales" rather than large "blue whales"—simply put, individual Bitcoin whales have not become wealthier. Therefore, we can infer a fact: the increase in the BTC balance held by Bitcoin whales recently is mainly due to the increase in the number of Bitcoin whales, not the growth of individual whale wealth.

Where Do the New Bitcoin Whales Come From?

Although the number of Bitcoin whales has increased recently, the reason may not be directly related to new funds entering the market. From this perspective, the real reason may be that wealthy whales have withdrawn a significant amount of Bitcoin from exchanges. As previously reported: since the "Black Thursday" market crash on March 12, 2020, the balance of Bitcoin on cryptocurrency exchanges has seen a significant decrease.

In the above figure, we can see that the decrease in BTC balance on exchanges coincides with the increase in the number of Bitcoin whales. Furthermore, the decrease in BTC balance on cryptocurrency exchanges is also related to the increase in the BTC balance held by Bitcoin whales, as shown in the comparison chart of the dominance of Bitcoin whales and exchanges in the next figure.

In 2020, the market dominance of Bitcoin whales began to rise, but at the same time, the market dominance of cryptocurrency exchanges declined, indicating that the total market value of Bitcoin has not undergone any significant changes.

Therefore, to explain why the number of Bitcoin whales is increasing, part of the reason is that wealthy whales have started to withdraw BTC from cryptocurrency exchanges in recent months, leading to an abnormal proportion of Bitcoin whales and giving the impression that many "new" Bitcoin whales have emerged in the market. However, since "Black Thursday" on March 12, a large amount of BTC has actually flowed from cryptocurrency exchanges to whales.

Well, perhaps now you can understand why there are many "Bitcoin whales" in the cryptocurrency market in such a short time. The answer is not difficult to understand, especially since a large amount of BTC has left cryptocurrency exchanges recently, and these BTC have basically entered the wallets of whales.

Although there is no definitive evidence to explain why a large number of Bitcoin holders choose to withdraw BTC from cryptocurrency exchanges, from Figure 9, we can see that Bitcoin whales seem to have taken advantage of "Black Thursday" to buy the dip and then transfer the BTC purchased through cryptocurrency exchanges to their wallets to HODL, seemingly with one purpose: to await the next bull market.

Summary

• Since the Bitcoin block reward halving in 2016, the number of Bitcoin whales (entities with at least 1000 BTC) has been increasing.
• Similarly, the total balance of BTC held by Bitcoin whales has seen an increase for the first time since 2016.
• Meanwhile, after nearly a decade of decline, the market dominance of Bitcoin whales (the proportion of the total value of BTC held by Bitcoin whales in the market) has seen its largest increase since 2011.
• Despite the positive performance of various indicators of Bitcoin whales, the total USD value of BTC they hold has not exceeded the peak of the bull market in 2017.
• In 2020, the average BTC wealth held by Bitcoin whales has slightly decreased, indicating that the average value of BTC held by "new" Bitcoin whales is not high.
• In the past, "new" Bitcoin whales always quickly acquired wealth, but now the wealth of "new" Bitcoin whales actually comes from transferring BTC out of cryptocurrency exchanges, explaining why, although the number of Bitcoin whales has increased, the average wealth has decreased.

This article is authorized for republication by ChainNews. Source: ChainNews (ID: chainnewscom)