The Great Bitcoin Power Shift Has Large Holders Dumping 500,000 Coins

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2 days ago

(Bloomberg) -- A silent transfer of control is reshaping the $2.1 trillion Bitcoin market.
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A steady stream of sales by long-time whales — miners, offshore funds and anonymous wallets — is being matched almost one-for-one by institutional players like ETFs, corporates and asset managers. The result: Bitcoin is struggling to break out of its record high around $110,000, volatility is evaporating, and its place in the investment landscape is being reshaped.
Despite a flurry of bullish headlines — from corporate treasuries embracing Bitcoin to the Trump administration's full-throated crypto endorsement — the largest digital currency has remained stuck in its trading range for months. Underneath the surface, long-dormant whales have been trimming positions just as institutions ramp up their buying. And this switchover is gradually recasting Bitcoin's identity from a high-octane trade to a slow-burn allocation.
Over the past year, large holders, or Bitcoin whales, have offloaded more than 500,000 Bitcoin — worth over $50 billion at current prices — according to data compiled by 10x Research. That's roughly equal to the net inflows into the wildly successful US exchange-traded funds since their approval. And it's not far off from the $65 billion amassed over the past five years by crypto treasury pioneer Michael Saylor and his firm, now known as Strategy.
Many of these whales trace back to Bitcoin's earliest cycles, when it traded far below current levels. In some cases, whales aren't simply selling, they're swapping tokens for deals tied to the stock market, bypassing the open market.
'What we're seeing is a churning in the base,' said Edward Chin, co-founder of Parataxis Capital. 'A less covered driver and potential reason for the churn and increasing network activity seems to be driven by whales converting their BTC into equity exposure through in-kind contributions of BTC into financing transactions tied to the public markets.'
Institutions — from ETFs and Saylor's Strategy to dozens of corporate imitators — now control about a quarter of all Bitcoin in circulation. Back in 2020, researcher Flipside Crypto estimated that about 2% of the anonymous ownership accounts that can be tracked on the cryptocurrency's blockchain controlled 95% of the digital asset. The power dynamic is shifting fast.
'Crypto is becoming less of an outlier and more established as a legitimate asset class,' said Rob Strebel, head of relationship management at the trading firm DRW, which includes crypto-focused arm Cumberland. Alongside that shift, 'we expect to see a compression in volatility.'
That appears to be already taking place, dampening one of the most alluring aspects of Bitcoin to many traders. A closely watched measure of price swings has declined to the lowest level in about two years, according to Deribit's BTC Volatility Index. The gauge monitors the 30-day forward-looking annualized expectations of volatility.
While the whales cut exposure, ETFs, treasury companies and other institutions combined have absorbed nearly 900,000 coins in the past year, according to 10x Research. These players now hold about 4.8 million coins, out of about 20 million Bitcoin in circulation.
But even as institutions bring stability and legitimacy to the asset class, some observers warn they're also providing the long-awaited exit ramp for whales, raising the risk that it's retail and retirement investors left holding the bag if crypto sentiment falters.
'The goal for a long time has always been to make Bitcoin a palatable asset for institutional investors to provide exit liquidity in volume so the whales could cash out,' said Hilary Allen, a law professor at American University's Washington College of Law, a long-time crypto skeptic.
After two straight years in which the price more than doubled, Bitcoin is still hovering around levels reached at the start of the year, despite President Donald Trump's pro-crypto agenda.
Some analysts now expect Bitcoin's appreciation to be capped at 10% to 20% a year. That's a far cry from 2017's almost 1,400% surge that pushed the token into the mainstream.
'Bitcoin is probably more like boring dividend stock over time,' said Jeff Dorman, chief investment officer at Arca. 'On average it goes higher every year, but by less and less amount. It becomes more of an attractive retirement asset.'
Still, the picture is incomplete. Not all whale activity is visible, and Bitcoin could prove ever-volatile soon enough, especially if a new market catalyst emerges.
Regardless, one big risk right now is imbalance: If Bitcoin whales resume selling at scale while institutional flows plateau, the market could tip into steep declines. Outflows of just 2% in 2018 and 9% in 2022 triggered Bitcoin price drops of 74% and 64%, respectively, according to 10x Research.
'We are nearing a point where the market is hitting its peak,' said Fred Thiel, chief executive officer of Bitcoin miner MARA Holdings Inc., which has yet to sell any of its Bitcoin holdings. 'My personal belief, however, is we are in a very different market dynamic today.'
All told, the shift from anonymous whales to institutional allocators may help sustain the current market dynamic for an extended period.
'This can go on for a long time — years,' said Markus Thielen, CEO of 10x Research. 'It's more of a slow grind, where Bitcoin becomes more of a 10%-20% asset. The nature of Bitcoin really changes.'
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