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Bitcoin Businesses The Almighty Buck Technology

About 40 Percent of Bitcoin Is Held By 1,000 Users. If a Few of Them Want To Sell, That Could Tank Values (bloomberg.com) 241

On Nov. 12, someone moved almost 25,000 bitcoins, worth about $159 million at the time, to an online exchange. The news soon rippled through online forums, with bitcoin traders arguing about whether it meant the owner was about to sell the digital currency. From a report on Bloomberg: Holders of large amounts of bitcoin are often known as whales. And they're becoming a worry for investors. They can send prices plummeting by selling even a portion of their holdings. And those sales are more probable now that the cryptocurrency is up nearly twelvefold from the beginning of the year. 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. 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.
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About 40 Percent of Bitcoin Is Held By 1,000 Users. If a Few of Them Want To Sell, That Could Tank Values

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  • Show of Hands! (Score:5, Interesting)

    by jwhyche ( 6192 ) on Friday December 08, 2017 @09:47AM (#55701267) Homepage

    Show of hands if you are tired of the bitcoin stories?

    • Re:Show of Hands! (Score:5, Interesting)

      by Oswald McWeany ( 2428506 ) on Friday December 08, 2017 @09:50AM (#55701297)

      Show of hands if you are tired of the bitcoin stories?

      I'm actually not... the responses to the stories are tiresome. It's the same over and over again from both lovers and haters of the coin. I am fascinated by how Bitcoin is doing though.

      • I am trying to estimate the pop. I have my hard guess, and it seems like it might climb to that but then it drops.

        So maybe just maybe. That said I don't own any but I expect ether to climb when bitcoin falls so that's my plan.

        • by Oswald McWeany ( 2428506 ) on Friday December 08, 2017 @10:08AM (#55701421)

          I am trying to estimate the pop. I have my hard guess, and it seems like it might climb to that but then it drops.

          So maybe just maybe. That said I don't own any but I expect ether to climb when bitcoin falls so that's my plan.

          I've wondered about that too. How many people will transfer their money to Ether when Bitcoin falls. Would be nice to be invested before that happens. I don't think we'll ever see Bitcoin completely collapse, but I think there will be a huge drop at some point where it loses half or more of it's value over a period of days. (and then stabilize).

          • I think the problem for Ether will be that any common exchanges will place both at risk. Ether still has a $XX Billion market cap, so I would say it has a long way to fall at this point.

        • by CanHasDIY ( 1672858 ) on Friday December 08, 2017 @11:04AM (#55701789) Homepage Journal

          Study the history of Goldman Sachs, if you want to know how bubbles are created, inflated, then intentionally popped.

          Related note - I hear that G$ has been looking into cryptocurrency as a new investment vehicle...

        • I figured 10K would be an inflection point, it would either run or pop. Obviouslly it's run.

          Next one is just before 50K and after that 100K

      • This. I'm generally annoyed by all Slashdot discussions where the subject touches my particular expertise, such as physics. Not the news themselves, but the same old supposedly funny/insightful comments. I'm much happier reading and commenting on something like graphics cards, where I can be the super enthusiastic idiot.
      • by goombah99 ( 560566 ) on Friday December 08, 2017 @11:15AM (#55701867)

        The interesting thing is that the real story seems to be missed entirely. Everyone wonders if it's a bubble or if the valuation is too high. That's not the problem. Bit coin is, in its present algorithmic configuration, doomed by it's algorithmic desgin features. Perhaps it will change but there's two flaws of which I will point out one here.

        1. Roughly 2000 transactions can be rolled up into each hash completion event. And by design the system equilibrates towards a difficulty where it take 10 minutes for a hash completion to occur. This means that when this becomes popular it becomes hard to directly record more than 2000 transactions (less due to over heads on side transactions) every ten minutes.
                That merely makes it slow. But when it becomes oversubscribed in demand for transactions then people pay bounties to get their transactions at the top of the queue. Right now that bounty is about $20 per transaction.
                let's compare this to a visa card. A visa merchant might pay 3% for the service. thus on a $666 transaction you would pay 3% or a $20 fee.
                Ergo, for any transaction less than $666 bitcoin is ludicrously expensive.

        thus it is slow, expensive and unsuited for ordinary purchases. It could be used to move large sums of money but not simple transactions or even micropayments.

        I beleive it is this, not the valuation of the coin that makes bit coin doomed.

        We saw the first high visibility retreat the other day when Steam stopped taking bitcoin.

        • by DarkOx ( 621550 ) on Friday December 08, 2017 @11:53AM (#55702175) Journal

          I know lots of people who are holding btc riding this thing up everyday. They think they are protecting themselves with standing sell limit orders and or stops.

          I wonder if when the big moves come and everyone tries to transact, if they end up getting wiped out because the exchanges can process transactions, and the other side of the transaction sees what's happening and disappears ahead of the order processing.

        • I think your numbers might be off somewhere; the peak day BTC transactions to the blockchain were 500k in 24 hours.

          I think everyone here understands that the transactional model for BTC is doomed; what (most) of us are surprised at is how many people think it is a store of value. I get that it is inherently deflationary, and that has its advantages... but there are just so many ways for you to be robbed or the value to fall flat... it just doesn't pass the smell test.

          As for a substitute for wire transfers

          • 500E3/24/6 = 3472 per ten minutes. Now nothing says BTC has to close at ten minutes, that's just it's threshold where a dificulty adjustment occurs. When the price rises more miners come on line and the rate of hashing increases. So for a while it's above 2000/ ten minutes. but then the adaptive algorithm kicks in and assumtotes back to that. so 3472 is quite beleivable as would 4000 for a transient peak.

        • Comment removed based on user account deletion
          • I wasn't trying to say it compars favorably to VISA cards. indeed I was saying it compares unfavorably. the figure i used, 3% is actually an upper bound on the transaction expense. IN reality VisaCards are less than that for most large transactions. plus all the other advantages you list.

            • by ceoyoyo ( 59147 )

              And credit cards are among the more expensive ways to move money. My bank charges $0.50 for a transfer up to $100 and $1 for transfers larger than that. Business accounts pay $1.50.

              • yes. but visa cards are intended for commercial purchases. Like checks use to be. Paypal lets you do ACH over the internet. but relatively few people use wire transfers to buy a McChicken and Shamrock Shake or a game on steam

      • You just need to dig deep enough to find entertaining responses. Like John McAfee deep. [twitter.com]
    • by c ( 8461 ) <beauregardcp@gmail.com> on Friday December 08, 2017 @10:08AM (#55701415)

      Show of hands if you are tired of the bitcoin stories?

      They used to be really annoying, but it's actually starting to get interesting; I feel like I'm watching the financial equivalent to a Russian dashcam live video stream.

    • by Luthair ( 847766 )
      Agreed, bitcoin shills have been pushing the stories and flooding the comments with cheerleading.
    • Yes. Tagged the story with "nomorebitcoinstories".

    • We were tired of them when it was only once a week, aka Bitcoin Tuesday.

      Every bloody day is nauseating.

    • Show of hands if you are tired of the bitcoin stories?

      But not too tired to post a whiny complaint?

      • by jwhyche ( 6192 )

        An the same could be said of you posting a whiny complaint about a "whiny" complaint?

        An Dragonslicer was a one trick pony. Sightblinder was where it was at.

  • by Steve Jackson ( 4687763 ) on Friday December 08, 2017 @09:49AM (#55701289)
    Have held their value for THOUSANDS of years. Bitcoin, has been around a few years and is as VOLATILE as they come. Not to mention totally intangible. Anyone dumping REAL CASH into this BS that isn't one of those 1000 people... Is giving away all of their money to those 1000 people. Basically. Because WHEN it tanks, the little guy loses 100% of their investment while they try and scramble to sell. While the 1000 sell out using high powered brokerages during its fall, and keep up to 50%...
    • by Oswald McWeany ( 2428506 ) on Friday December 08, 2017 @09:59AM (#55701361)

      Gold and Silver are for maintaining wealth.

      Bitcoin is for gambling with wealth. I think a lot of people are now viewing it as a get-rich-quick scheme. Sure, there are some serious investors in it, and some legitimate money gains by some people; but it doesn't create wealth. (Quite the opposite, since it takes wealth to mine). For one person to get $1,000,000 in bitcoin, other people must collectively give up $1,000,000.

      All these people getting rich are doing so at the expense of other people who join later.

      • by Anonymous Coward

        You've just described Bernie Madoff's ponzi scheme.
        But this time it's done on/with computers so it's new believe me. I think someone should patent this lol.

    • Gold and Silver are inflation resistant currencies. Say you had a silver coin which you could buy a nice suite 80 years ago. A silver coin of the same quality and size, would be able to buy nice suite now.

      Having Gold and Silver say worth $1000 today in 100 years it may be worth $20,000 However except for paying $150 a week for groceries you will be paying $3,000 a week, and the average middle class person would be making $100,000 a week.

      Having gold and silver doesn't create wealth, it just maintains the we

      • Value of gold and silver are not pegged to inflation, so they are most certainly not inflation resistant.
        • They are not pegged to inflation, but their price has normally been on par with it. Because Gold and Silver are a tangible item so their value will be nearly steady with inflation. We get spikes and dips because of a demand surge, or if a new supply is found. But in general you will be getting the same return as inflation.

          This isn't bad, because it can help sustain wealth. But it isn't a good way to create wealth.

    • Gold and Silver do fluctuate in value when you compare it to inflation. There have booms and busts. Just not nearly as much as BitCoin... or probably any other currency, for that matter.

      But if you are worried about something holding value, you are not really investing, just storing wealth.

  • You have to take into account that this isn't a unique situations. If billionaires start dumping all of their dollars they could tank the whole US economy. They don't do that because it would be massively against their own interests, just as it would be against the whale's own interest to tank Bitcoin, they are the folks who have the most to lose in destabilizing it, and are going to do everything they can to stop that from happening.
    • by GameboyRMH ( 1153867 ) <gameboyrmh.gmail@com> on Friday December 08, 2017 @09:59AM (#55701357) Journal

      The whales could have much to gain from tanking Bitcoin: Hold the coins to keep the value up, wait for publicly traded companies to form specializing in BitCoin transactions, then (before governments clamp down on cryptocurrencies or any strong signs of a coordinated clampdown are apparent), short those companies and dump the coins. Quickly use the money from the coins to buy even more short orders, and laugh at the collapse all the way to the bank.

      • Exactly - the traders make money through volatility of price, not through long-term growth. The fact that a few people can essentially control the price of BitCoin makes it easy for them to manipulate the price (up or down) to make a lot of money.
      • by DarkOx ( 621550 )

        Quickly use the money from the coins to buy even more short orders

        You realize that would put in a flow and effectively and potentially create a sqeeze.

    • by iggymanz ( 596061 ) on Friday December 08, 2017 @09:59AM (#55701359)

      no, the size of the money supply is too massive compared to any billionaire dollar holdings. There are *countries* that could affect the dollar with their holdings, but no individuals

      • The amount held is not the issue. Not even with 40% being held by 1000 people. The real issue is confidence. If all of the world's billionaires started dumping dollars it would be seen as a lack of confidence in the dollar and everyone (not just the billionaires) would follow.
      • Not yet, anyway. As inequality worsens and trillionaires arise, that could change.

        • by iggymanz ( 596061 ) on Friday December 08, 2017 @10:27AM (#55701541)

          nonsense, the banking system and countries will always be the big players and *by design* would grow to quadrillions in holdings as the trillionaires came into existence, it can't be otherwise since the debt the trillions represent are the banking system's asset.

      • no, the size of the money supply is too massive compared to any billionaire dollar holdings. There are *countries* that could affect the dollar with their holdings, but no individuals

        Not only can it be done. It has been done. I forget who it was (possibly Edison) that used to tank small countries currencies for fun and profit.

        • the point is the US is not a small country, the dollar is the global currency. only large countries or the western banking cartel manipulate it

      • by Cederic ( 9623 )

        If Buffet, Gates and Bezos all collaborated they could definitely shift the market in USD.

        Shit, Soros managed to shaft the GBP all on his own.

        • And where will Buffet, Gates, and Bezos get more than a few billion US dollars between them? They don't have bins full of money like scrooge mcduck, they have shares in companies, they can't get the actual money out in cash, if they withdrew more than a few percent of their wealth, they would collapse the rest of those companies and be left with nothing.
          • by Cederic ( 9623 )

            A few billion from three people would be akin to using a sledgehammer to start a domino rally.

            (I suspect they don't have more than a few million lying around in cash, to be fair)

    • by pr0t0 ( 216378 ) on Friday December 08, 2017 @10:11AM (#55701435)

      I was about to say the same, but with some numbers for context:

      Currently, about 700,000 people hold 50% of the world's wealth. While that's 700 times the number of people in control compared to BTC, it also $280T or roughly 1000 times the total market cap of BTC.

      https://www.usatoday.com/story... [usatoday.com]
      https://blockchain.info/charts... [blockchain.info]

      • by ceoyoyo ( 59147 )

        You're equating wealth to bitcoin, a single "currency."

        For a fair comparison, figure out how many people hold 50% of the world's US dollars.

    • by Nidi62 ( 1525137 )

      You have to take into account that this isn't a unique situations. If billionaires start dumping all of their dollars they could tank the whole US economy. They don't do that because it would be massively against their own interests, just as it would be against the whale's own interest to tank Bitcoin, they are the folks who have the most to lose in destabilizing it, and are going to do everything they can to stop that from happening.

      True, but billionaires can also leverage their billions in non-liquid forms to generate income, whether through loans, interest payments, rents, whatever. So they have no real need or desire to ever pull out all their cash. These 1000 people holding bitcoins, while their coins are accumulating theoretical value they have no way to cash in on that value except by cashing out on their holdings, which would drastically and negatively affect their value. The only way they could really cash out is by growing

    • Came to say this -- Bitcoin is a lot like traditional investments in many ways, including this.
    • Comment removed based on user account deletion
  • by daveschroeder ( 516195 ) * on Friday December 08, 2017 @09:51AM (#55701307)

    ...because that's exactly what Bitcoin is. A pyramid.

    An investment, but worse than any stock, because it's an investment in nothing.

    And yes, it's also a "cryptocurrency" -- congratulations. Blockchain!

    • How is it a pyramid when I can buy in, make money, and then cash out?

  • by Baron_Yam ( 643147 ) on Friday December 08, 2017 @10:27AM (#55701543)

    Google 'slaying the bearwhale' for lolz; the last time a whale cashed out, Bitcoin nuts actually convinced each other to buy up the coins as fast as they were released in order to keep the coin value up. Obviously the smart move if you really believed in Bitcoin's long term viability would be to let the price crash and buy at the bottom, but the Bitcoin ecosystem isn't exactly chock full of rational players.

  • The other financial markets already have tons of techniques for making large sells without tipping your hand and getting picked off by front runners, just ask anyone dealing with institutional brokerage. The problem with BTC is, the ledger is public, so if a whale starts moving a large wallet into lots of smaller ones people will know. If I was holding BTC I would definitely want to start breaking it up into lots of smaller wallets just as a precaution. Maybe this whale is getting some professional financia
    • If own an exchange, you can run a mixing service.

      Essentially, you can churn those coins until it takes a major forensic analysis to figure out who owns what, and even then you won't have certainty. Of course, you're going to lose a lot on transaction fees with the current state of Bitcoin if you want to work with smaller amounts...

  • So exactly what part of "Pyramid Scheme" do these idiot "investors" not understand.
  • by Solandri ( 704621 ) on Friday December 08, 2017 @12:03PM (#55702247)

    About 40 percent of bitcoin is held by perhaps 1,000 users

    Bitcoin currently has about 15 million userrs [statista.com]. So 1000 of them is only 0.0067%.

    1% of the world's population owns about half the world's wealth [theguardian.com].

    By creating a currency ostensibly free from the corrupting influence of government control of fiat currencies, bitcoin has managed to become a currency which is 150x even more corrupt.

  • On Triskelion, just 3 gamesters held 100% of the quatloo supply.
  • For the best deal (Score:4, Interesting)

    by mysidia ( 191772 ) on Friday December 08, 2017 @01:08PM (#55702745)

    On Nov. 12, someone moved almost 25,000 bitcoins, worth about $159 million at the time, to an online exchange.

    Mostly; the online exchanges just aren't equipped to handle massive volumes, as we witnessed Coinbase crashing. If they REALLY wanted to unload such a massive amount, rather than simple trading...... the most efficient way to get the most bang for their $, would likely be to find a large buyer directly ---- for example, sell 25,000 BTC to a major bank or investment firm at a small discount to the exchange price, rather than trying to dump it on the exchange, and getting a lot less $$$, because the price goes down on the exchange the more units you sell, and before you know it the buyer-demand is exhausted and short term price is less than you want to sell for.

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