Between December, 2017 and March, 2018, the price of Bitcoin has fluctuated wildly. During this time, the BTC price went as high as roughly $20,000 and as low as roughly $6,000. There are a number of reasons why Bitcoin prices saw such intense volatility during this time. Some of these reasons include exuberance over the BCOE and the CME launching Bitcoin futures and intense regulatory concerns in many nations around the world such as South Korea.
However, another key contributing factor to the Bitcoin price volatility in the past four to five months is the fact that a Mt. Gox trustee has been selling hundreds of millions of dollars’ worth of Bitcoin into the market in order to recoup funds to pay off creditors.
Who is the Tokyo Whale?
The Tokyo Whale who has been selling enormous quantities of Bitcoin and Bitcoin Cash on behalf of Mt. Gox is named Nobuaki Kobayashi. Kobayashi has sold a total of 35,841 Bitcoin. At today’s prices (3/14/18), that is worth right around $300 million. Kobayashi acts as both Mt. Gox’s lawyer, and its trustee.
The next bankruptcy hearing for Mt. Gox is not until September of 2018, and it is being predicted that Kobayashi will not sell anymore Bitcoin until after this hearing. This creates a solid five or six-month period in which normal Bitcoin trading volumes will not be heavily influenced by the high-volume sales of the Mt. Gox trustee.
If Kobayashi really does stop selling tens of thousands of Bitcoins for six months, then it could prevent some of the sudden downturns that have seemed to accompany bullish runs for Bitcoin in the last four months or so. High volume sales can drive the price of Bitcoin down, and it can also cause panic selling where investors start selling off because they believe that the market is about to crash.
If the Mt. Gox trustee stops selling thousands of Bitcoins at a time, then it is possible that there will be fewer sudden Bitcoin price drops which result in panic sells. As a result, the price of Bitcoin could be set for a recovery due to reduced downward pressure.
Despite the fact that Kobayashi has already sold almost 40,000 Bitcoin, he still has roughly another 166,000 to sell. If he sells them in the same fashion that he did for the previously 35,000, then Kobayashi could cause further market drops whenever he does decide to sell. However, there are alternative ways to offload these Bitcoins. For example, he could sell them through an auction as opposed to simply dumping them onto the market.
An auction sale was conducted by the U.S. government when it sold the Bitcoins that it collected from its take down of the infamous dark web site Silk Road. During this auction, the U.S. government successfully sold roughly 144,000 Bitcoin. Auction sales can cause significantly less market disruption than sudden high-volume sales on exchanges.
So, when the Tokyo whale does start selling again, whether it is after the next bankruptcy court date in September, or before, the manner in which he decides to sell his remaining Bitcoins could have a major impact on the price of the top cryptocurrency by overall market cap.
Although the activity of the Tokyo whale is obviously not the only factor that influences the price of Bitcoin and how volatile it is, it certainly does have an impact. If Kobayashi stops selling for the next six months, then it could help to reduce downward pressure on the king of cryptocurrencies, and allow investors to have more faith in the asset.
However, if Bitcoin is to go on another upward tear, then it may need a period without major regulatory issues occurring. This is because every time another national government speaks about regulating Bitcoin, the price tends to drop.
But, even despite the fact that Bitcoin’s upward trajectory often faces obstacles such as massive whale sell orders, hacked exchanges, and regulations, its price continues to move upwards significantly almost every single year. In fact, even just in the last eight months, the price of Bitcoin has risen from about $2,500 in July of 2017 to roughly $8,300 in March of 2018. So, historically, Bitcoin has proven to overcome many obstacles, and the Tokyo Whale could just be another one it successfully moves past.