Whales move the market, but not alone, says new report

Analysts behind the Twitter account Whale Alert use publicly available blockchain data to monitor movements that could potentially make a splash in the market. By tracing these transactions and watching the subsequent price action, they see first hand the impact of buying and selling large amounts of bitcoin.

Crypto Prime Dealer SFOX has conducted an interview with Whale Alert that discusses the movements of bitcoin whales and the effect they have on the market.

Whale watching

The academic study that claims a lone whale manipulated the bull run of 2017 is the work of professors John Griffin and Amin Shams, at the University of Texas and Ohio State University, respectively.

They claim to have analyzed 200 gigabytes of blockchain data on transactions between bitcoin and tether, and found possible manipulation that could now be cited as key evidence in an ongoing class-action lawsuit against Bitfinex and tether.

Many of the transactions between bitcoin and tether, say the academics, can be traced back to a single source — a wallet on the Bitfinex exchange.

This suggests a single trader could be responsible. But, the Whale Alert team — the Twitter account that tracks large transactions and broadcasts the details — says it is not unusual to trace a large wallet back to a major exchange.

These trading platforms, along with high net worth individuals and cryptocurrency companies, are said to be "some of the biggest Bitcoin whales out there."

"While many may imagine individual traders when they hear the term ‘whale’ says Whale Alert, "exchanges are by far the richest custodians of Bitcoin, and their wallets are the largest.”

While the trader behind this single wallet might have influenced the price of bitcoin, Whale Alert has identified several other instances where different holders of large amounts of bitcoin have also made an impact.

On August 29th and September 6th of 2018, a single whale was found to have moved roughly $1 billion worth of BTC from a wallet to various different exchanges for selling. Shortly afterwards the price of bitcoin fell almost 15 percent, with 30-day volatility increasing almost 25 percent.

Whale Alert also makes a link between "whale-sized real-world events," and market movements.

He uses the example of how Whale Alert called attention to the transfer of ten thousand bitcoin that was seized from the illicit South Korean darknet market taken down in October.

“Almost directly after that big transaction, the price of BTC dropped. Indeed, Binance’s order book shows an influx of volume just a few hours later on the 18th," says van Weert.

**Printing Tether **

In the contested academic report, the finance professors claim that bitcoin was manipulated by new tethers that were created without the dollars to back them. These tethers are said to have artificially propped up the price.

This thesis has been dismissed as nonsensical by several figures in the industry, who see it as a thinly veiled attempt to undermine the cryptocurrency market.

Bitfinex general counsel Stuart Hoegner said the study “lacks academic rigor”, claiming that it offers no proof of its claims. “It is the global rise of digital currency that has driven the market’s demand for tether,” said the lawyer.

The Whale Alert team is undecided on the influence of tether issuances on the price of bitcoin and does note a correlation between the printing of tether and upswings in price.

But whether the issuances cause the upwards movements is impossible to tell, and whether the issuances themselves are fraudulent can’t be determined without access to Bitfinex bank accounts.

“There had been an enormous amount of USDT issuances, and a lot of people see those as a positive market development," says Whale Alert. "They assume those USDT are going to be used to buy BTC. Now, I don’t know if that assumption is correct, but a lot of people reacted to that."

This echoes other commentators, including Bitcoin ETF proponent Gabor Gurbacs, who shot down the academic study for relying on "spurious correlations."

Looking ahead, Whale Alert expects the impact of whale traders to eventually wane as the distribution of bitcoin improves and individual players exercise less influence over the market.

At the same time, greater insight into stablecoin transactions could be expected as traders move away from Tether to a growing number of competitors offering greater transparency.