A theory emerged when bitcoin plunged by 15% in two days last week. – On the Internet: A whale was moving. Speculation arose that a major holder in cryptocurrency with an electronic wallet dating back to 2011 – well before anyone had heard about HODL – was selling. His or her wallet once contained as many as 111114 bitcoins. These bitcoins would have been worth approximately $2 billion at their peak.
The Whale
Two weeks ago, rumours began that this whale, as large holders are known, was looking to cash in after this year’s plunge. Reddit was the scene of heated debates. Several graphs resembling Galaxy were shared. The origin stories of bitcoin from Dread Pirate Roberts and Mt Gox were re-emerged.
This case contains all the elements of a classic Bitcoin mystery: famous wallets and a vicious cycle that reinforces a selloff. It also shows intense amateur sleuthing online that may not have been the right match. It also demonstrates what makes bitcoin so unique: anyone can trace transactions thanks to its pseudonymous and public blockchain.
Chainalysis, which offers cryptocurrency tracking tools for companies and law enforcement, reported that 50 transactions involving 50 500 bitcoins originated from the whale’s wallet involved 50 transactions between August 23rd and 30. They would be worth approximately $320 million based on the closing price of Bloomberg’s composite data on August 22. Chainalysis stated that they could not confirm that the coins were traded.
Detective Work
“This is actually really fascinating because of the Reddit Detective work that’s been occurring and just people making assumptions that this whale cashing out,” stated Kim Grauer, senior economist at Chainalysis New York. It leads to conspiracy theories that someone is trying to sabotage Bitcoin – simply from someone moving their funds for security reasons or we don’t know why.
Chainalysis’s software detects money laundering by mapping relationships between addresses. This allows it to identify at most one counterparty in around 80% of transactions Grauer stated.
The narrative is also complicated by the fact that while the 50 500 bitcoins originated from the whale (address: 1933phfhK3ZgFQNLGSDXvqCn32k2buXY8a), most were scattered in 2014 to various wallets that might all be controlled by the same person – or not – and later moved to one wallet again.
Chainalysis reports that there were very few transactions associated with this stash up until last year when a thousand Bitcoins were cashed from the original address. There was then a period of low activity, which continued until August.
The bitcoin community has a tradition watching out for the wallets of early hoarders such as Satoshi Nakamoto (the pseudonymous creator) of the cryptocurrency.
Dread Pirate Roberts
Some people speculated on crypto news sites Reddit and Twitter that the wallet was linked to Ross Ulbricht. He went by the alias “Dread Pirate Roberts” and was convicted of operating Silk Road, an online marketplace selling illicit goods. This site was one of the first to adopt bitcoin. Another theory is that the wallet is linked to Mt. Gox, a Tokyo-based exchange that collapsed, must pay its creditors by selling some of its remaining bitcoin.
Last week’s bitcoin crash was accompanied by a firestorm over ShapeShift, a long-standing exchange that began collecting user information. There were also reports that Goldman Sachs was withdrawing from plans to establish a crypto trading desk in the near future. In the five days to September 7, bitcoin dropped 8.5%. It is up 0.6% so far in this week.