Bitcoin does not generate income. So the whales will hope restricting supply will push BTC into another parabolic rise, and sell as BTC price hits peak velocity. If you are dumb money, that’s when you will buy, and that will make you a bagholder. You will be stuck, possibly forever or until you sell at a huge loss, as you desperately cling to the hope that the BTC price might hit those impossible highs one last time. It’s possible but unlikely. Most securities get one big parabolic rise in their lifetime. Twice is an outlier. Three times would be almost unprecedented.
Owners of “whale wallets” scooped up 450,000 BTC as the bitcoin market hit bear-market lows in late 2018. It appears whales now control 25% of all BTC. These private, non-institutional buyers decided an 85 percent decline was a buying opportunity. The market sent BTC prices higher. Now they hold bitcoin, hoping to exploit the law of supply and demand. By hoarding coins, liquidity dries up, theoretically forcing prices higher.
This is the same tactic used by DeBeers, the UK-based diamond cartel to control prices in the diamond market for more than 100 years. DeBeers hoarded an otherwise unexceptional mineral, started its own hype machine that diamonds were amazing things everyone must have, the media caught on, and a scam was born. DeBeers controlled 85 percent of the market. They also had the advantage of controlling most of the world’s mining.
This whale action is bad for bitcoin. All it does is rev up the hype machine. It inhibits the natural flow of an already artificial market. It will make bagholders out of a lot of people, who will then lack the liquidity to do any further trading. And it will solidify the truth: that bitcoin’s volatility make it useless for anything other than insanely speculative traders.