Bitcoin Gold at the Mercy of a Whale with About Half the Supply
Bitcoin Gold (BTG) ‘s price is reportedly being manipulated by one whale that controls almost half of the circulating supply. These are proven findings of an analysis done by an independent trader and analyst who insisted on remaining anonymous.
All the findings were published in a blog post where the analyst stated the reasons why he thinks a single person or group of people have accumulated their way into a large Bitcoin Gold position. Currently, they are using that supply to control the market.
Bitcoin Gold Accumulation via Bitfinex
These events started in August 2018. At that time, Bitfinex margin long post started its steep ascent to feature just about two million BTG. The exchange always makes its margin data publicly available. This strategy helps commentators to make the general trader sentiment in a particular coin. For instance, they can compare the ratio of short and long positions.
In the case of Bitcoin Gold, the significant increase in margin positions was coupled with poorly performing price action. Even though the coin followed the broader crypto market direction, the price, in the end, spiraled downward.
The 1.9 million BTG held in Bitfinex at some point, represents around 38% to 48% of its total circulating supply according to the estimates by the analyst. Bitcoin Gold was launched in 2017 after a network fork from Bitcoin (BTC). Hence, it maintains its original history up until the fork. Therefore, Bitcoin Gold has as many inactive coins as its parent, which comprises of Satoshi’s cache.
The analyst explained how he reached that figure:
“Over 11 million Bitcoins (BTC) hasn’t moved in the last year. It can be argued that a number even larger than 11 million BTGs are inactive or lost forever Considering big wallets’ unwillingness to claim their coins due to fear of private key leak for a minimal return.”
He went ahead to estimate a figure of 4M to 5M active BTG. When asked why he believes the market trends are the work of a single whale, he said:
“The accumulation was very consistent and systematic for almost a year; it would be almost impossible for it to be a coincidence that multiple entities were using the same system to accumulate.”
The analyst also did an extensive manual analysis of the average entry price for this whale. He compared the number of coins acquired each day with their price. Then, he arrived at a figure of $22.86 as the breakeven price.
Bagging the profits
After an extensive accumulation, the whale started using its position to influence the markets. Sometime in early January, Bitcoin Gold’s price surged in consecutive moves by around 200% from $5 to $15. Margin positions reduced sharply just as this upward move completed.
Since there were no significant announcements made through Bitcoin Gold’s Twitter account at that time, it is possible that the price action could be fabricated. The analyst also highlighted that Bitfinex’s wallets were subsequently drained of a considerable amount of BTG.
Research further showed that Binance was not the destination wallet. Korean exchange Bithumb was the likely receiver of these funds according to a volume comparison. This could be a part of the whale’s distribution strategy, which might attract external retail traders to participate in a fake pump to enable the whale to offload the coins.
The BTG price was held back from rising due to a powerful ‘sell wall’ on Bitfinex set around $15. Meanwhile, the surge in activity on Bithumb made the analyst conclude that the whale might be Korean since the exchange needs a national Social Security Number to create an account.
Is this a coincidence?
The abrupt decline in the Bitfinex margin can also be explained by the whale constantly divesting from BTG. The trading group “claimed” its position according to the analyst:
“I think the whale was planning on selling on Bitfinex originally, and then realized there wasn’t enough liquidity to exit there, so now they’re forced to send their coins to another exchange (by first ‘claiming’ their margin position, and then withdrawing).”
By description, ‘claiming’ is settling a margin position through compensation of the amount loaned in its entirety. These market manipulation strategies have since been witnessed on Binance:
“Bitfinex acts as a suppression mechanism; every time the price tries to increase on Binance, Bitfinex holds it back. People (and bots) see the difference and try to pounce on the arbitrage opportunity. However, by the time people transfer their BTGs from Bitfinex to Binance, the gap has already closed, and the prices equalize.”
According to data from February 10 trading, candles on Bitfinex have a “clean-cut” around $13.8. On the other hand, the price on Binance moved past this barrier.
The analyst is convinced that the traders will look for a chunk of profits due to the scale and time put into BTG accumulation:
“It is expected that the price of BTG will multiply in value from the current value of ~$12 (as of this post) and increase a substantial amount from the $22.86 projected breakeven price.”
He suggested that the potential target could be $100, translating to a maximum profit of $150 million. The latest attempts at price suppression are essential to ensure that interest does not burn out too quickly. The analyst explained:
“If the price rises too fast, it’s destined to downtrend for an extended period as people gradually take profits, and there is no-one to buy up the increasing supply hitting the market.”
For now, there is no conclusive evidence that points to the Bitcoin Gold team’s involvement in this market manipulation.