On June 25, a giant whale caught the attention of the cryptocurrency circle.
F2Pool co-founder Godfish tweeted that a crypto giant whale borrowed more than 20,000 BTC to short the market on the 25th. It is reported that this is the third time this giant whale has operated openly, having borrowed over 25,000 coins to short on Bitfinex last week.
01, the logic behind shorting and market impact
Datamish.com data shows that bitcoin short positions did move dramatically in June.
As the red line on the chart below shows, on June 7, June 9-10, and June 25-26, bitcoin short positions increased steeply by 4,852, 12,052, and 24,072 BTC respectively. on June 18-21, and June 26-27, short positions decreased by 20,903 and 21,424 BTC respectively.
The red line is the BTC short position, source: Datamish.com
Correspondingly, after a period of intensive coin borrowing by the giant whale, such as June 7-June 18 and June 25-26, the bitcoin price rose by 1.7% as well as fell by 10.29% respectively, achieving market manipulation to some extent.
According to the microblogging information, the giant whale borrowed close to 50,000 BTC on Bitfinex, and if calculated at a price of over $30,000 per coin, the value of the borrowed coins exceeded $1.5 billion, using more than tens of billions of RMB.
However, in this process, Giant Whale is also under huge financial pressure.
On the one hand, borrowing large volume of funds on the trading platform requires paying high interest rates.
BeepNews checked the data and found that in the process of this giant whale borrowing coins to pay back coins, the BTC borrowing rate in the market fluctuates around 0.16%. If calculated at 0.16%, the giant whale borrowed more than 20,000 coins during June 7-18, and needed to pay interest on about 232 BTCs. If the whale borrowed more than 20,000 coins between June 25-26, it would have to pay more than 32 BTC.
On the other hand, although the giant whale is manipulating the market, its profit and loss is also largely influenced by the market.
The logic behind the giant whale shorting is to first borrow a large amount of BTC using the USDT on hand, sell BTC in a short period of time by hanging a low price order to cause market panic and pull down the BTC price, and then buy BTC at a lower price to return the borrowed assets.
If the market manipulation is unsuccessful and BTC rises instead of falling, plus the cost of borrowing interest and other costs, Giant Whale may face a considerable loss, or even the possibility of being liquidated. In fact, the giant whale did lose money in this shorting attempt.
According to calculations by Jiang Zhuoer of Lebit Mining Pool, the giant whale used tens of billions of yuan to push the price of BTC to $28,800,000, but the profit it made by buying and selling the BTC spread was not enough to cover its borrowing interest.
During the period from June 7 to 25, the giant whale sold 23,212 BTC at an average price of $36,500 and bought 22,715 BTC at an average price of $35,200, making a profit of 30.23 million USDT, accounting for 1.83% of the invested capital. And over these ten days, the interest it has to pay may be more than 2% of the invested capital.
Perhaps because the daily interest cost was too high, during June 25 to 26, the giant whale adopted a fast-in and fast-out approach, borrowing more than 20,000 BTC on the 25th-26th, and buying BTC to return the mortgage on June 27.
At this point, this wave of shorting operation came to an end for the time being. Considering that mainstream lending platforms require over collateral, it can be judged that the value of USDT assets held by the giant whale may be much higher than tens of billions of RMB, and the giant whale is considered a predator-level existence.
However, probably because the recent market bearish news is close to exhaustion, BTC downward space is relatively limited, the giant whale invested so much money can not continue to suppress the price of BTC to a low level, and eventually lead to losses. (Not as investment advice here)
Some users on Weibo described this operation as a “shit-stirring operation”. BeepNews interviewed Jiang Zhuoer about the shorting motive of Giant Whale, and both he and Weibo users believe that there is a possibility that Giant Whale was informed of the insider news in advance.
02, Giant Whale is an important player in the crypto ecosystem
Giant whales are a “rare species” in the crypto ecology, but they have a significant influence on the market because of the huge amount of funds they hold.
The information of non-trumpet shows that as of the time of writing, there are a total of 38,249,282 addresses holding BTC, of which only 86 have a balance of more than 10,000 BTC. Although the number of the top 1000 addresses only accounts for 0.0026% of the total number of addresses, the BTC assets held reach 59.44% of the total.
There are numerous examples of cryptocurrency mega-whales earning revenue and even influencing the price of the currency by virtue of their large capitalization and their superior knowledge of the industry:.
-From March 2020 to February 2021, the number of addresses with holdings in the range of 1,000-10,000 BTC grew by 14%, corresponding to a steady upward trend in BTC prices during this period. Since then the number of giant whales in this holding range has decreased and the BTC price has fluctuated more sharply.
BTC price performance during this period, source: Coingecko
-On May 4 of this year, a giant whale purchased a large number of BTC puts on Deribit with a strike price of $46,000 and expiration on May 21. Bitcoin was trading at around $50,000 at the time. The addition of the giant whale increased the open interest in this option by nearly eight times. This was followed by the big crash that impressed the cryptocurrency community on May 19.
-On June 4, 2019, Bitcoin had a plunge within a 2-hour period. There were 4 suspicious transfers around the time of the crash, 25,160 BTC from unknown wallets to Coinbase, 14,160 BTC and 11,000 BTC from Coinbase, and a 10 million USDT transfer. Some analysts speculate that this is the giant whale shorting and making $10 million profit in 2 hours.
Of course the giant whales don’t always realize profits with every variation, as mentioned earlier, the giant whale that tried to short the market from June 7-27 is likely to be in a losing position if you don’t consider that he/she (they) have other operations.
In the cryptocurrency market, the law of the underdog is equally appropriate. Where we can’t see, the whales may be watching and waiting for an opportunity.
But as Jiang Zhuoer said, “The cryptocurrency circle is a huge global market, and even tens of billions of RMB-level funds are just like ants in this market.” No participant can stand against the time and market trend.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/borrowing-nearly-50000-coins-to-short-btc-reveals-a-giant-whale-in-the-crypto-ecology/
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