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Author Topic: The bitcoin market, a diabolical comedy of bitcoin whales  (Read 113 times)
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December 09, 2017, 09:11:32 AM

According to Boomberg, about 40% of bitcoins is owned by perhaps 1000 people. Those who owned most bitcoins are in minority, they are often miners or people who joined the market in the early period.

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This kind of market model easily gives birth to “bitcoin whales”. Bitcoin whales are individuals who own majority of bitcoins. They can easily manipulate the market, leading to the corruption of the system. The fewer the number of whales, the easier the market gets monopolized by them. In the case of bitcoin, they only need to sell a small amount of bitcoins to plummet the price. Later they can repurchase them at lower price. The situation is worse if these whales join force together. Indeed the sharp drops in price were evidences of their market manipulation. Up to this point what I say nothing new because you can find them everywhere online. The data reveals that that bitcoin whales do exist. No only they exist, they do what they do for economic and security incentives.

First of all, bitcoin has no intrinsic values. It is merely a currency, which doesn’t have other application (think of smart contract in Ethereum). Nobody can really tell the future of it. The bubble may either boom or bust. Owning a big amount of coins put bitcoin whales in a vulnerable position of losing their fortune. After all, these are just data, not physical wealth. Therefore, they must find a way to secure it, to materialize their bitcoin into real wealth. There are several methods to achieve that, selling all of their bitcoins at the peak of the market and invest in other property like real estate.

 Whales must determine when to exit the market. If they do it too soon, they risk benefiting other whales if others continue to stay in the market. If a majority of whales withdraw from the market, the system of bitcoin will go down.  As more people are trading bitcoins now, it will be unwise to choose the withdrawing method.  The ideal method is to join force with other whales to create a group Grin, let’s call this “union X”.

This method provides way more benefits and security. The incentive of joining union X for the whales is high because if they don’t do that they will risk being ostracized. Once they are cast out, they won’t be able to know what other whales are doing  Huh and that puts their bitcoin fortune at risk Embarrassed. It is much safer to conform.

I believe the price stayed fairly stagnant for 2 years because they overdid it (sharp drop from $1000-$200) causing lots of players withdrew from the market. Traders lost faith in bitcoin.  Still bitcoin survived. As time passed by a new group of whales was formed, they could also be that same group of whales. Thanks to the last experience, their method has become more subtle. They don’t want to drop the price too much because if bitcoin is down they also suffer OPPS.  If they can take control the price drop around 20% while keeping the trader around. It looks like the case now and even more traders join the market. The price will continue to rise in the future so they can make even more money then.

 Bitcoin traders are helpful pawns that also benefit from the price raise in bitcoin. Together this creates a win-win situation in terms of money, although the victory of whales is much greater thanks to the help of millions of traders. We got small chunk of money while they become wealthy, truly wealthy.  As an ordinary traders, I joined the bitcoin market for 2 days then withdrew from it when I realized that I was helping a group of people who provide no values for society to become multi-millionaires. I am truly fascinated by the vision of whoever came up with the concept of crypto-currency, the block chain technology, and how the marriage of cryptography and game theory keeps the system running. Nonetheless, I just don’t like the dynamic of bitcoin market right now. It is a game reserved for early comers only.


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