"About 40 percent of bitcoin is held by perhaps 1,000 users; at current prices, each may want to sell about half of his or her holdings, says Aaron Brown, former managing director and head of financial markets research at AQR Capital Management. (Brown is a contributor to the Bloomberg Prophets online column.) What’s more, the whales can coordinate their moves or preview them to a select few. Many of the large owners have known one another for years and stuck by bitcoin through the early days when it was derided, and they can potentially band together to tank or prop up the market...
As in any asset class, large individual holders and large institutional holders can and do collude to manipulate price,” Ari Paul, co-founder of BlockTower Capital and a former portfolio manager of the University of Chicago endowment, wrote in an electronic message. “In cryptocurrency, such manipulation is extreme because of the youth of these markets and the speculative nature of the assets.”
Olga Kharif, Bloomberg: The Bitcoin Whales: 1,000 People Who Own 40 Percent of the Market
'As in any asset class, large individual holders and large institutional holders can and do collude to manipulate price,'
Amen brother. That's why we need regulators and oversight that is not 'captured' by those same very large institutions and wealthy political donors. Gold and silver, I suspect, are going to be remembered as one such market that fell victim to the canard of free and naturally efficient markets and the natural rationality and fairness of financial and economic actors.
And they are going to be bringing out a futures market and ETFs based on these digital chits.
My son and I had some time to discuss a number of things the past few days. He is a much better mathematician than I was at his age, and that makes sense because what he is doing at the PhD level for Electrical Engineering starts to become very heavily dependent on math. I was much more of a boy programmer and systems architect.
He actually was 'mining' his own bitcoins some years ago using a rig he set up using a video card and a few things he threw together just as a learning exercise.
I was curious to know about these 'forks' and where that was shaking out. As you may know, Bitcoins have a memory block of a certain size. As a transaction in bitcoin occurs, that transaction is broadcast to the ENTIRE community of bitcoins, and is updated on them. I did not realize that is how it is set up.
The 'forking' is the usual
scalability story, a fix to address a structural memory shortage, as we saw in the internet when we started running out of IP addresses based on the original IP block architecture.
Now I understand why bitcoin transactions can take so long to complete, and why they are not being used in day to day transactions. And they are not, despite the hype.
What I did not understand was how highly concentrated bitcoin ownership had become, and why the 'bitcoin' is becoming more fragmented with different groups with their own architecture creating their own
non-interchangeable types of bitcoins and crypto-currencies.
I was a little surprised when he explained to me why and how a small group of oligarchs with access to enormous computing power were essentially in control of the future of the market. The early adopters are essentially along for the ride.
And then today the story broke which I quoted above and below. And then the whole thing kind of fell together for me.
I told my son to take his bitcoins and cash out now, If he can find the codes for them that is. It has been a while and he did not not 'create' that much.
I cannot believe that the regulators have allowed the CME to bring out futures for these things, which apparently they are going to do over the weekend. Futures on a very immature, unregulated commodity which is closely held by about 1,000 people, most of whom know each other.
I am not saying that everyone involved with this is a scammer. Most of the casual participants are either technocrats who think it is cool, speculators who are tempted in for a quick buck, or libertarians who would otherwise be buying their money in their backyards.
This is nuts. And it is going to end very badly.
"Roughly 40% of the cryptocurrency is owned by 1,000 people, claims Aaron Brown, head of financial markets research at AQR Capital Management. In such an unregulated market, Brown said large holders of bitcoin could potentially be working together to orchestrate price changes. Given bitcoin’s recent spike, now could be a great opportunity for these users to part with a portion of their bitcoins, locking in the near 1600% price increase since the start of the year.
Bitcoin appears to be making its way into mainstream investing. Last Friday the US regulator gave the CME group and CBOE Global Markets the green light to launch bitcoin futures. Just yesterday, London-based digital banking company Revolut launched Bitcoin, Litecoin and Ether trading for their users.
As the cryptocurrency becomes a more mainstream investment and demand for it rises, these bitcoin ‘whales’ will be able to part with their bitcoins for a hefty profit. This could leave new investors with an asset in the midst of a bubble.
Roger Ver, a well known early adopter of bitcoin said, regarding ‘whales’ working together, “I suspect that is likely true, and people should be able to do whatever they want with their own money.”
Read the entire story at Market Mogul here.
