Cryptocurrency: A Whale of a Tale

This article is not about whale watching as you know it. It is also not about the environment as you know it. It is about whales, but the whales that move in the digital financial world. And yes,their every move is being watched.

Like most things in life there is the 'haves' and the 'have-nots'. Notably, this is a matter of perception. But in the cryptocurrency world, the 'haves' are known as whales.

To become a whale, one must have more than 1,000 bitcoin (BTC) in your wallet. According to River Financial, there are 5 wallets with more than 750,000 BTC. I would strongly argue that we could probably name all of them.

To date there are over 200 million BTC wallets. Of these, over 65,000 have a wallet with a value of over $1 million in BTC and just under 5,000 have a wallet with a value of over $10 million in BTC. When you compare this with the rest of the addresses, then it would be reasonable to consider the rest are plebes.

In June 2022, the crypto market 'crashed'. BTC went from over $47,000 in March to just a little over $19,000 in June. It was a complete bloodbath with millions of accounts liquidated and everyone with a crypto wallet, experiencing a significant loss in the value of their asset/s.

Apart from this, 7 cryptocurrency platforms went bankrupt. Arguably, this carnage was the result of a whiplash effect caused by an attack on Terra Luna (Luna). Luna, which soared to a high of $119.19 per token, came crashing down to less than half a cent within minutes. The traumatic impact was a result of an exploit on the Venus protocol which resulted in a loss of over $11 million.

Primarily, the cryptocurrency ecosystem is extremely volatile. In my opinion, I have taken note of several significant threats. However, for this article I will focus on two. The first is the lack of security controls and the second is market manipulation.

In 2010, there was a flash crash due to an Artificial Intelligence algorithmic error. Trillions of dollars was lost on the stock market. George Soros, who was allegedly identified as the person that caused the crash, made over $1.5 billion from this crash. There were others that capitalized off this loss, but it was Soros that made the greatest gain. The question was raised as to whether this type of error could happen again.

Twelve years later, Terra Luna, which was considered as one of the more successful decentralized financial cryptocurrency platforms, experience a similar attack as seen in 2010. This exploit saw a loss of over $830 billion within the crypto market. This crash impacted everybody including those who don't dabble in cryptocurrency (the domino effect). This exploit does leave one with a couple of plaguing questions. Who was behind this attack and who is responsible for the algorithmic accountability?

In 2021, Elon Musk became an instant crypto hero by adopting the Dogecoin (Doge). Doge is considered as a meme coin with no infrastructure or platform support. In the beginning of January 2021, the Doge Token was valued at $0.008. After several tweets from Elon Musk, Doge went through the roof hitting an all time high of $0.73. To put that into perspective, if you bought $100 of Doge at $0.008, by beginning of May 2022 you would have had $9,125.00. Of course, the more zeros you add, the greater the money made. If you feel the urge to suddenly hunt for crypto gold, I would err on the side of caution. This "gold rush" mentality has claimed many victims. But what has been highlighted is that a person of influence can impact the cryptocurrency market which has raised many eyebrows in the regulatory arena. Incidentally, Mr Musk is currently being sued for $258 billion for causing both the the incline and the decline of Doge.

In a recent discussion with crypto expert Coach K on Crypto Banter (an leading crypto news and coaching company), it was highlighted that whales have been adding BTC to the crypto exchanges. According to Coach K, this could lead to the price of BTC being pushed higher with whales capitalizes off this move by liquidating their assets at a higher price. This will have a negative impact on the market which can send the price of BTC and alternative (ALT) coins plummeting.

On 19 August 2022, I noticed a significant drop in both BTC an ALT coins. After some research, I found several Whales had moved BTC both on and off the exchange. Notably, I did a little more digging and found one address that was reported as fraudulent and linked to many scams. It was also linked to a reputable crypto exchange platform. My main question was why this address had not been frozen? Arguably if Canada could freeze cryptocurrency then so should other entities. Of course, this sparks several more question, one which is the ability for whales to manipulate the market of BTC that ultimately impacts the whole digital financial ecosystem.

My concluding thoughts is that while I love the concept of a decentralized platform, I find that the cryptocurrency market is in much need of regulation. For such a new concept, when compared with a traditional financial system, this ecosystem has a lot to offer and with the right structure and people, it can grow and thrive positively in the digital world. I believe that this type of regulation should not hinge on an 18th century mindset which is already struggling to keep up with technology. Instead, it should consider an alternative approach which includes movers and shakers to be part of the digital regulatory environment. After all, this is a currency that is not owned by one government but by the people. In my opinion, this is what decentralized really means.