Bitcoin Whales Just Split Up $5.5B Into Smaller Wallets

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Clearly the recent increase in the price of Bitcoin caused accounts with a lot of BTC to do something. But on a chain built with privacy in mind, it’s never easy to deduce users’ intentions. 

What’s interesting is that whales are not sending their BTC to exchanges to liquidate. Instead, they are sending their BTC to smaller wallets. 

Whales in this case are defined as addresses that control over 1,000 BTC. In other words, users who hold over 13 million USD. 

Since the price of BTC started to increase, whales have sent a total of 423,914 BTC to other addresses on the blockchain. That’s equal to 5.5 billion dollars divided up in “smaller wallets” which hold under 1,000 BTC. 

This is what you see happen in the bubbles above — the large transactions from whales (light blue) to smaller wallets (in green) — and what we can see in the bar graph below as well. This is clearly an anomaly compared to regular whale activity. 

While we have no way to prove one or the other, here are a few potential explanations. 

Tax Evasion?

The travel rule of international banking stipulated that to exchange crypto to cash, only transactions over $10,000 have to be reported. 

That means that if you were trying to get your Bitcoin into some other asset tax free, it would be wise to split up your total balance into smaller amounts, before transacting those on centralized exchanges. 

It would make sense, with the price of Bitcoin rising, that whales are preparing in this way to liquidate. The smaller transactions are the easiest way to avoid attracting attention from regulatory bodies. 

Private Sale? 

Bitcoin whales could also be selling BTC to new investors entering the market. In a recent interview with Laura Shin, Willy Woo explained that he saw a massive influx of new investors, CEOs and boards of directors, scooping up Bitcoin to put them in corporate and personal wallets. Perhaps new institutional investors are looking to purchase BTC directly from the OG’s and sidestep exchanges all together.

The announcement last Thursday of payment giant Paypal allowing its 346 million users to buy and spend Bitcoin is also likely contributing to the increase in new users entering the Bitcoin market. Currently, only 23.4 million people hold Bitcoin in their wallets, and if you count exchanges, that’s 101 million active unique accounts total. Paypal is almost 5x that. 

Obfuscating Transactions?

Large holders of Bitcoin could also be trying to exchange their BTC without revealing the source or nature of the transaction. One technique to do so is called “layering”, or splitting up a haul into smaller and smaller amounts before settling it, so as to cover your tracks — similar to what crypto-natives call “fanning out”. Similarly to the travel rule incentive, the smaller transactions also attract less attention in general. 

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