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A whale diving into a coin, which has broken into several pieces. Please see resource section for attributions.

No More Free Willy - Why We Should Stop Applauding Corporate Killer "Whale" Adaption of Bitcoin

By mekhiMKL | The Layperson's Crypto | 17 Apr 2020


There is a tendency within cryptocurrency spaces to applaud any and all signs of corporate adaptation of bitcoin. Unfortunately our community has begun to mistakenly conflate such adaptation with an indication of future growth. 

You'd think we would remember that corporation and government control of assets is the very reason so many of us embraced cryptos in the first place. 

Without corporate greed and malfeasance, and government policies that exploit the majority of average, everyday people in service of said corporations, cryptocurrencies might never have developed. If the world was a more economically just and fair place, there would be far less demand for decentralized financial "structures" which seek the active participation of the masses. 

Maybe we lose sight - because of so much focus on trading, investing, and markets - of the positive and unique role cryptocurrencies play in the lives of many people around the world when it comes to meeting their basic needs. Outside of the overly regulated, centralized economic horizons of the western world (particularly the United States) a mass of street-level consumers, not corporate bosses, are rapidly adapting cryptos and using them creatively and actively within their local communities on a daily basis.

As the scale of small, local transactions grow throughout the world, along with pressure from corporate giants for special consideration, we find ourselves nearing a time of decision.

Will we follow through on the vision of so many innovators in our community, and advance a seismic change in how finances and economies function, worldwide?

Or will we become too distracted by the old model of a privileged few making money at the expense of the majority of us, in the hopes that we might lap up the odd table scraps? 

A cartoon rendering of a photo of bitcoins in a bowl of gravy.

Are we really content to become the dogs underneath our own table, while self-appointed corporate masters feast on our entrails?

That is the future if we capitulate the demands of the financial oligarchs and let them eat at our table for free. We know, because it is the present state of fiat economies around the world, where corporations often pay no taxes and are freed from the restrictions placed on ordinary, actual people. 

As main street gave ground to wall street, the fiat financial world began to resemble a haunted house where we found ourselves stuck behind an unending series of locked doors, hearing the sounds of prosperity and freedom in the distance but never able to locate or access them ourselves. Now, the defacto gatekeepers of our new cryptocurrency home - content creators, exchange managers, and other financial service providers - rush to open every door for the economic elite. We already know where we will find ourselves if we allow them to take over, as they have in the fiat realm. 

A locked door, with the shadow of a bitcoin symbol on it. For attributions, please click on image.

As such, we should do everything in our power to prevent the cryptocurrency community from falling into this trap. 

The most important change is the hardest, but also one of which we have complete control. 

We need to radically realign our perspectives with the liberatory potential of cryptocurrency technologies. We need to abandon the old world mentalities once and for all, lest they unleash that same sickness of corruption into our new world. We need to value, uphold, and expand human adaption of cryptocurrencies, and stop privileging government or traditional corporate entities as the benchmark by which we value our own potential and innovations. 

The latest market crash fully illustrates the repercussions of "corporate adaption". The whales are snatching up increasing amounts of BTC and the effects on the market are evident. The baseline trading volume throughout the past few months has been at a record low. Some of this may be due to more "bulk" trades conducted through exchanges or services who have begun to fill multiple consumer orders in bulk single orders before distributing the proceeds back to their end-users. However, a great deal of this loss of volume can be attributed to whales, who, all at once in what might be viewed as coordinated attacks, carry out prolonged "pump and dump" actions against BTC, tanking the market as a whole. The surge of buying and selling of BTC, at arbitrary times, causes a huge amount of volatility in what is now otherwise a low volume market. 

A bitcoin boat being upset by a whale, against a sea of a market chart. For attributions please click on image or see link bundles at the end of the article.

Glassnode released some alarming but unsurprising data on this topic in their weekly report "The Week On-Chain" back on April 9th,  which has also been cited by WorldCrypto, a fellow publish0x author.  In fact, there have been multiple articles written on this topic since the first week of the month, with most writers mirroring the pro-corporate slant of the original report by Glassnode.  

One of the most alarming, seemingly oblivious statements in Glassnode's report simultaneously underlines the danger and negative impact of whale adaption, while simultaneously applauding it. 

The number of whales (i.e. entities with at least 1000 BTC) increased leading up to last month’s market crash, and accelerated during and after the crash. This suggests that larger market players are accumulating BTC, providing an optimistic sign. (emphasis own) 

Obviously the correlation between the increase of whales and increased volatility suggests something more important and should illicit more than just a restating of the established facts,. Suggesting that it is an "optimistic sign" stinks of corporate bias so overpowering that Glassnode and many of its followers cannot see the forest for the tress. There's a reason that whales increased, and then the market crashed, and then whales turned around and further centralized their holdings. If you look at the behavior of the whales, the unilateral push to suddenly buy, then sell created what, more or less, amounted to a flash crash scenario. I fail to see how informed individuals trying to get paid for market data and analysis would see this as anything but the market equivalent of a 51% attack, whether through intentional, coordinated market manipulation, or cut-throat corporate greed and apathy. Certainly the cryptomarket's recent performance continues to attest to this danger. 

I was blessed that I happened to notice this increase in volume matched with some worrying technical and analytical indicators, and read it as a big flashing warning sign. I got out early as the whole market started to slip downward. I had a harrowing couple of hours of moving assets around as the downward pull began to suck in the alt coins too. I then threw the majority of my funds into staked currencies that typically run strongly against BTC. That night I went to sleep wondering if I was too hasty in my rush to effectively lock up my money. I strongly prefer keeping everything as liquid as possible, but I felt my back against the wall. There just wasn't anywhere to put anything that didn't start to succumb to market forces, while maintaining the kind of liquidity I typically enjoy. I avoided looking at any market data or news, dreading that somehow I had made a foolish and unnecessary move.  Yet within a couple of days the news I had avoided forced its way to my attention. It was unavoidable - a lot of people had been caught unawares and lost money and were talking about it everywhere. I pray that they are able to get back to prosperity and solvency soon.  It could have been worse - and it may be worse yet again. 

Glassnode writes, again seemingly without any self-awareness: 

The number of whales hasn’t reached this level since the top of the market in late 2017. However, that figure was reached during a capitulation phase (i.e. when whales were selling).

And then they continue, directly after: 

The last time we saw this number of whales during an accumulation phase was in early 2016. This pattern becomes interesting when we compare it with the last halving event.

The above is a selective interpretation of why whales massively sold in late 2017. after having heavily bought in 2016. It leaves out the irresponsible games played in some segments of the futures market, as a rash of corporate giants moved their funds out of actual BTC and into futures in order to limit their exposure to the crash they were precipitating.  It also omits the massive effects that these corporate tidal waves had on markets. The market crash which followed this behavior was so significant that it caused traders and hodlers alike to doubt the future prospects of cryptocurrencies, and even some analysts to declare cryptos a failed experiment. The most recent crash felt like a ripple by comparison. As someone who witnessed the carnage, I don't view the growing centralization of cryptocurriences by whales with "optimism" - quite the opposite.   

A whale eating a human against a background of bitcoins. For attributions please click on image.

Apparently, though, Glassnode can neither read the writing on the wall (even if it is their own data) or support their "optimistic" assertions about the entry of more whales into the market. Apparently, only a small percentage of the volume increase among whales can be accounted for by new entries. 

However, when adjusting to remove in-house transactions by using entity-adjusted volume, we see that this increase only equates to 7.5%. This indicates that a portion of the increase in on-chain volume is coming from individuals and organizations moving BTC internally.

Continuing on, they conclude: 

Despite this, the total number of active entities has increased by 4.7%, indicating an increase in on-chain economic activity overall.

These "internal moves" indicate that whales are buying up as much coin as they can while independent investors are forced to exit positions en masse due to corporate fuel crashes and volatility. Whether this behavior represents a premeditated plan or just looting the spoils of their own irresponsible trading isn't nearly as germane as the continued impact it will have on markets and cryptocurrency users. 

This problem provides an opportunity for our crypto-innovators to develop market tools and services which can soften the impact of these whales. Regardless of what form these new developments take, we must first step away from the pro-corporate hype and prioritize protecting ourselves, the future of cryptocurrencies, and our community above catering to special interests. We can't allow large conglomerates to appropriate, then cannibalize the very inventions that were created to help level the playing field and provide a new economic horizon worldwide. 

We don't have to capitulate to corporations in order to prove the legitimacy of cryptocurrency. We have created, and will continue to create other measures - including the most important measure of whether or not cryptocurrency is improving the quality of life for people around the world. It is, and will continue to do so as long as we face the data head on, unflinchingly tell the truth to the best of our ability, and maintain the vision of cryptocurrency-fueled economic justice.  Just like we wouldn't view centralization or mass accumulation on the blockchain as a positive indicator, neither should we cast such moves in a positive light when they threaten to seize control of the market and eventually make it impossible for average human beings to use or trade cryptocurrencies.

Let's make 2020 the year we took back bitcoin, not the year of another major market crash like in 2018.

The whales are shoring up their gains just like they did before the last huge crash - we can't let them do it again. 

So, no more Free Willy. It's time to take back the sea for the fishes.  

A pack of whale bacon against the faded background of bitcoins and a market chart. Click on picture for link to attributions.

What are some ideas that you have about how we can protect the market and ordinary bitcoin users and investors? What projects, tools, or do you know of do you think are doing a good job of offsetting the negative impacts of whales?  

Edit: Please also see this recently published article by MadMaxx on a recent whale pump

Disclaimer: Please either click on the images or see links below for attributions of source photos I used to make my illustrations. Please also be aware that nothing in this blog or article is intended as or should be construed as financial or investment advice. Any responsibility for investments or trades you may make is your own. 

 

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