Transparency is one of the most fascinating aspects of cryptocurrency, and this openness attracted many early advocates of Bitcoin (BTC).
Blockchain technology makes all of the information associated with the operation of the network accessible to anyone who wants to take a look. All known addresses, transactions, fees paid and other details regarding multi-signature and SegWit usage are open.
The 15 richest Bitcoin addresses have always been the focus of attention for several reasons. Some crypto researchers usually sort the top addresses and look for traces of Bitcoin inventor Satoshi Nakamoto. Others study data to track crypto whales’ maneuvers and predict market manipulations that lead to volatile fluctuations in the price of Bitcoin.
The top addresses have even caught on with government agencies like the United States Internal Revenue Service and the Treasury Department.
In fact, entire companies have been set up that specialize in obtaining additional information about cryptocurrency addresses and their potential associations. It’s no secret that the US Internal Revenue Service has hired Chainalysis and Integra FEC, two cryptanalysis firms, to track transactions.
More recently, Treasury Secretary Steven Mnuchin’s Treasury Department is examining whether or not a rule is required for self-hosted cryptocurrency wallets. If approved, these changes will underscore the importance of privacy for market participants.
Addresses are not the same as entities
Top 15 Bitcoin Addresses. Source: bitinfocharts.com
As shown above, the top 15 addresses hold 1.07 million BTC, or 5.7% of the outstanding Bitcoin supply. At the current price level of USD 26,500, this corresponds to USD 28.3 billion. While this is a large amount of Bitcoin, it’s also worth noting that the total volume of BTC on spot exchanges exceeds $ 5 billion per day.
It’s important to note that the first deposit date of an address does not mean that the company that owns the address first purchased coins on that day. The coins could have been sent from another address of the same entity. Hence, the data showing that the first funds have been sent to 11 addresses since 2018 does not prove that the address owners are new to the industry.
It’s also worth noting that none of the top 15 addresses are supposedly Satoshi’s holdings. Researcher Sergio Lerner has shown that the blocks mined by Nakamoto contain unique patterns known as patoshi patterns. Although the mined BTC has not yet been moved, it has not been assigned a single address.
The top 100 addresses concentrate 15.7% of the total supply, which is pretty impressive compared to the distribution level in the traditional markets. For example, the top 20 funds that own PayPal stock collectively hold 19.7% of the total stock offering.
Five of the 15 most important addresses are known addresses from exchanges, which indicates that the apparent concentration does not exist in a way that can be attributed to crypto whales.
In addition to the exchanges that hold large sums of Bitcoin in wallets, some custodians also collect BTC for numerous customers in wallets that are spread across multiple addresses with large sums of money.
The top addresses are current owners and not SegWit-compliant
An impressive eight of the 15 best addresses have never withdrawn a single Satoshi. With the exception of the five exchange-related addresses, only 20% have ever moved their coins. This suggests a heavy penetration by hardcore owners.
In addition, 11 of the 15 addresses were first used less than three years ago. There could be several reasons for this weirdness, including improved security measures, a change in custodian bank, or different ownership structures.
Only two of the top 15 addresses (and three of the top 200 addresses) are Bech32 SegWit compatible, which can significantly reduce transaction fees. This indicates that, despite the clear benefits of cheaper transactions, users are resistant to change. What’s even more interesting is that the Bitfinex cold wallet, at number two on the list, is the only one that has ever had an outbound transaction.
A few mysterious addresses continue to pile up
The third richest address is a mystery as it contains an unspoiled 94,506 BTC. The address made headlines back in September 2019 after Glassnode reported that 73,000 of the BTC in the wallet came from Huobi.
Many analysts suggested that these coins are linked to the Plustoken Ponzi program, but those rumors were proven false after Chinese police seized 194,775 BTC from the fraudulent exchange on Nov. 19.
Apart from the fourth largest wallet with 79,957 BTC as of March 2011, 20 of the 300 best addresses are older than nine years. While no one can prove that these funds were lost, most assume they are.
These pristine coins total 313,013 BTC, and only one address has been settled since their creation. Aside from the 9,000 BTC from F2Pool that is stored at address 1J1F3U7gHrCjsEsRimDJ3oYBiV24wA8FuV, there is therefore a very good chance that the funds from the other addresses will be effectively lost.
1P5ZEDWTKTFGxQjZphgWPQUpe554WKDfHQ balance. Source: bitinfocharts.com
The fifth-ranked address shown above was created in February 2019 and was listed as the 81st largest address when it was created. Since then, it has accumulated regularly, increasing from 1 BTC in December 2019 to 4,100 in a single transaction in June 2019. Despite being a large accumulator, seven transactions were made, ranging from 786 BTC to 3,000 BTC. Whales may even have to pay bills.
Between November 30, 2018 and December 18, 2018 exactly 100 addresses are used, each containing around 8,000 BTC or 12,000 BTC. These addresses are usually assigned to Coinbase Custody. In the amount of 881,471 BTC, the credit of the addresses corresponds to 96% of the cold wallet of the exchange according to chain.info.
The new whale top theory
Every investor feels that the arrival of new Bitcoin whales is critical to a sustained rally, even if there has not yet been any clear evidence of this effect.
There is a constant flow of new addresses in the top 300. For example, 16 of them have received their first deposits within the last 30 days. Again, this is not necessarily a new entity, but an address that receives its first BTC.
While unusual, there are sometimes gaps of 50 days or more without newcomers getting into the top 300. Coincidentally, these periods mark the end of rally periods and a healthy correction usually follows.
BTC / USD price on Coinbase, early 2020. Source: TradingView
Exactly zero of the top 300 addresses were originally used between November 28, 2019 and February 9, 2020, when BTC rose 35%. Oddly enough, the market fell 52% over the next 32 days.
BTC / USD price on Coinbase, 2017. Source: TradingView
A similar effect occurred between October 18, 2017 and December 11, 2017. During that period, BTC gained 193% while none of the top 300 addresses were newbies. In the following 36 days there was a price drop of 34%.
Previously, none of the top 300 addresses were initiated between April 20, 2017 and July 7, 2017. Meanwhile, BTC rose 111%, while during that period it fell 24% in nine days.
So far, history has shown that the new whale theory makes sense: the market bounces over longer periods of time with fewer new addresses, making it onto the top 300 list of owners as this indicates accumulation by companies that are already had a position. On the flip side, new whales may be driven in fear of missing out, which usually indicates local peaks.
Therefore, it makes sense to monitor the top addresses and on-chain data to assess possible corrections.
Any time large deposits go into exchanges it indicates a potential sell order and is viewed as bearish by traders. These movements are then compared to the highs and lows of BTC prices to find a correlation between whale transfers.
Whenever the market recovers and miners in turn cut sales, analysts expect a price correction as soon as they move coins again. To put things in perspective, that is 6,300 bitcoin per week that needs to be absorbed by the market to avoid price impact.
Now that institutional investors have “arrived”, investors will be excited to see if their inflow in 2021 will continue to absorb newly minted BTC.
While 2021 looks pretty optimistic for the crypto market, there is always an unexpected drop in prices, often due to looming government regulation.
This means that it will continue to be important for savvy investors to keep track of the top 15 Bitcoin addresses and the movements of the crypto whales in 2021.
The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph. Every investment and trading step is associated with risks. You should do your own research when making a decision.