By: Steve Dellar | 12-09-2017 | News
Photo credit: Jan Lievens | Dreamstime

Bitcoin’s Whale Problem

Bitcoin, which seems to have stopped its meteoric rise at the time of writing and is looking at a ‘correction’ to its price, has of course proven to be ‘the’ investment of 2017 for many millennials, even though without regulation, it remains something of investing in the ‘wild west’, whereas any government could ban it at any time.

Be that as it may, as a mathematician and investor, one can only look at the earnings ratio with envy for this year. Having traded at below $1,000 in January still, it briefly touched $19,000 on one of the Bitcoin exchanges earlier Friday before flattening off and correcting.

However, investors have pointed out another troubling problem looming on the horizon, known as Bitcoin whales.

Due to the fact that 5 years ago, very few people were keen to invest, the market is currently controlled by about 1,000 people who control some 50% of the market.

There is nothing illegal about that, however, it does pose a big risk for the smaller investors who entered the market only in the past few months.

Mr Kyle Samani, Managing Partner at Multicoin Capital explains: “I think there are a few hundred guys.”

“They all probably can call each other, and they probably have.”

The fact that Bitcoin is a digital currency and not a security means that there is no prohibition against a trade in which a group agrees to buy enough to push the price up and then cashes out in minutes.

According to Mr Samani, they could decide to do so as soon as the price reaches a certain target they have agreed upon: “As in any asset class, large individual holders and large institutional holders can and do collude to manipulate price.”

“Investors are generally more forthcoming with other investors,” Samani continued. “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.”


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Anonymous No. 13660 2017-12-09 : 18:29

20% off the top by now. Start of the crash?

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