What Happens To Bitcoin When Crypto Whales Lose Access To Their Wallet?

Imagine having millions of dollars of Bitcoin stored in a Bitcoin wallet. One day you either forget your wallet keys or you lose the hard copy of them. For whatever reason you are now unable to access your Bitcoin fortune. Sounds pretty bad, right? Surely something like that would never happen.

Think again.

Many people with Bitcoin in a cryptocurrency wallet have forgotten or lost their private keys. You never hear about the great majority of them because a large number of lost Bitcoin wallets have less than one Bitcoin in them. Much less. But what happens when a crypto whale loses their wallet? What if that wallet has enough Bitcoin in it to crash the market? The scenario is scary for those who buy and sell crypto.

The 80,000 Missing BTC

A group known as Whale Alert monitors Bitcoin transactions to spot so-called dormant Bitcoin wallets. The Twitter-based group recently identified a Bitcoin wallet that is believed to hold 80,000 BTC. The current cash value of the hoard is somewhere north of $750 million.

The address could belong to a whale who is simply holding onto the Bitcoin as an investment. It might even be a wallet that belongs to Satoshi Nakamoto. The owner of the wallet could just be sitting chilly waiting for the right moment to cash in. Or, the wallet could belong to someone who no longer has access to the keys. Perhaps the owner is no longer alive and did not pass the wallet keys on in a last will and testament.

What matters is that having 80,000 BTC just sitting out there is like a thundercloud that is waiting to burst. Let’s say the owner of the wallet is alive and well. Someday they decide to cash in. Selling that amount of Bitcoin could have a devastating impact on the cryptocurrency market.

The Bitcoin Whale Effect

Something known as the Bitcoin Whale Effect is an example of the power wielded by those with large stashes of Bitcoin. Between the months of August 2018 and September 2018 Whale Alert reported that a Bitcoin whale had sold about $1 billion of the crypto token after moving it from wallets to a crypto exchange. In the period of the sale, the market price for Bitcoin dropped 15%. Volatility increased by 25%.

In another example authorities in South Korea were able to close down a child abuse ring which distributed child abuse images on the Internet. As a result of the closure 10,000 BTC were seized and auctioned off. After the auction the price of BTC fell sharply, leaving investors with a loss.

What is unique about these types of events is that the effect on Bitcoin price can often be localized to one Bitcoin exchange. That makes it much more difficult to pinpoint how the Bitcoin Whale Effect would impact cryptocurrency markets as a whole.

The Second Coming of Satoshi Nakamoto

Satoshi Nakamoto is credited with being the creator of Bitcoin. The name is believed to be an alias for a number of developers. Whatever the case, Nakamoto owns what is believed to be one of the largest Bitcoin troves owing to the development of the cryptocurrency. Like some of the dormant wallets found by Whale Alert, the Nakamoto wallet seems to just be out there in cyberspace gathering dust.

*** Here at CryptoSwede you will find information on Crypto Mining the different cryptocurrencies as well as the best cryptocurrency exchanges. You can trade or you can set up trading bots instead and then store the crypto on crypto wallets. Later, spend them using crypto debit cards!***

If Satoshi Nakamoto were to suddenly appear and announce the selling of the BTC in the dormant wallet, the entire crypto marketplace could crash. The price of Bitcoin might tumble once again to the realm of three digits. In a matter of hours large investors could be completely wiped out.

Such are the concerns that every cryptocurrency investor must deal with. There is really no way to determine which whale wallets are still active and accessible. It is a good bet that the BTC in many of these dormant wallets is lost to the market forever, but it would only take the appearance of that one whale to bring down the walls of the kingdom.

More Topics:

Leave a comment