Bitcoin Whales Are Dwindling: What Does That Mean for the Market?

The number of Bitcoin whales is dwindling, according to figures released this week from blockchain data provider Glassnode. That fact might seem counterintuitive. Aren’t more big players in the finance and tech worlds buying up Bitcoin than ever before? 

Well, yes and no. 

It’s true that large companies, such as Square and Tesla, have bought up large hoards of Bitcoin within the last few months. Payments company Square, for example, now holds $394 million in Bitcoin as part of its treasury. And Elon Musk’s car company famously purchased a whopping $1.5 billion in Bitcoin last February (though Musk is now suddenly concerned about Bitcoin’s “environmental impact” and tweeted yesterday that Tesla will no longer accept the cryptocurrency as payment.)

But despite the seemingly growing trend started by MicroStrategy last summer of big firms holding BTC on their balance sheets, the number of whale addresses (digital wallets holding 1,000 or more Bitcoin—over $48 million-worth of the currency) has been steadily decreasing over the last year. 

In the past month, the number of Bitcoin whales has dropped considerably: this time in April the figure was 2,231 such addresses, according to blockchain data provider, Glassnode. 

Yesterday, it was 2,167—the lowest it’s been in 10 months. That looks like quite a turnaround from just January, when the number of whales hit an all-time high. 

So, is this something investors should worry about? If big investors buying up Bitcoin signals that demand for the coin is going up, then could large accounts dropping off be a sign of that demand going down?

Not necessarily, market analysts told Decrypt.

Pedro Febrero, head of blockchain at crypto fantasy marketplace RealFevr and analyst at Quantum Economics, said that it is not a bearish indicator but could rather be the opposite—that more people are getting involved in the Bitcoin world and the currency is being widely distributed. 

“In order for Bitcoin to get further distributed, the number of whales needs to considerably drop,” he said. 

“We think that the number of whales should drop as Bitcoin's price grows. Essentially once whales sell, it's hard for them to get back into the market at the same price, or below,” he added.

Ex-banker and analyst Alex Kruger also told Decrypt that the decrease in whales was not enough to signal a bear market. “It’s just noise,” he said. 

And it would seem both analysts are right. A report released today by Coin Metrics shows that Bitcoin is getting more widely distributed: addresses holding between 0.01 ($477) and 1 Bitcoin ($47,773) has shot up this year. 

“The number of addresses holding relatively small amounts, between 0.01 and 1 BTC, has grown by 710K since the start of the year with a big surge in April,” the report says. 

“For context, in 2020 the number of addresses holding between 0.01 and 1 BTC increased by a total of 610K.”

Febrero added that Coin Metrics’ data shows that Bitcoin could be getting further redistribution—but he did add that more addresses doesn’t necessarily mean more people. The same number of big holders may be creating new addresses to diversify risk, he said.   

Analysts have previously said that Bitcoin whales control the market. Some dispute this, but even if it is true, experts have told Decrypt that it’s likely as the industry matures, whales will gradually drop off and the distribution of Bitcoin will even out. 

We could be witnessing that now.