The Bitcoin market is actually a world of bankers: 1,000 people own 40% of the market share

According to Bloomberg, on November 12, someone put 25,000 bitcoins on an online trading platform, which is worth about $159 million. The news quickly spread on online forums, and bitcoin traders were arguing whether this meant that the owner of the bitcoins was about to sell the digital currency.

People who hold large amounts of Bitcoin are often called "whales." They are becoming a concern for investors. They can even drive down the price of Bitcoin by selling a small portion of their holdings. And now, it is more likely that these whales will sell their holdings, as the price of the cryptocurrency has increased nearly 12 times since the beginning of the year.

About 40% of Bitcoin is held by 1,000 users; at current prices, each person might want to sell about half of their Bitcoin, said Alan Brown, former managing director and head of financial market research at AQR Capital Management. What's more, whales can coordinate their actions or reduce the number of actors to a few. Many of Bitcoin's large holders have known each other for years. In the early days of being ridiculed, their situation was also embarrassing because of Bitcoin, and now they may unite to hit or support the market.

"I think it's a few hundred people," said Kyle Samani, managing partner at Multicoin Capital. "They're probably connected to each other." Gary Ross, a securities lawyer at Ross & Shulga, said one reason for this: At least some of the information sharing is legal. He said that because Bitcoin is a digital currency, not a security, there are no prohibitions related to digital currency trading: a group of people banding together to buy enough Bitcoins to drive up the price, and then causing it to plummet in a matter of minutes.

Regulators have been slow to catch up to cryptocurrency trading, so many of the rules remain unclear. If traders are not only driving up prices but also spreading rumors online, that could be fraud. Digital currency exchange Bittrex recently wrote to its users, warning that their accounts could be suspended if they band together to form "pump groups" designed to manipulate prices. The law may also be different for other digital currencies. Some commodities may be considered currencies depending on the details of their structure and the money investors expect to make, according to the U.S. Securities and Exchange Commission.

When asked whether people who hold large amounts of bitcoin would unite to act, prominent bitcoin investor Roger Ver said in an email: “I doubt it’s true. People should be able to do whatever they want with their money. I personally never have time for something like this.”

“Like in any asset class, large individual holders and large institutional holders can collude to manipulate prices,” Ari Paul, co-founder of BlockTower Capital and a former portfolio manager at the University of Chicago’s endowment, said in an email. “In cryptocurrencies, such manipulation is extreme because of the youth of the market and the highly speculative nature of the asset.”

The recent rise in bitcoin prices is hard to explain because bitcoin has no intrinsic value. Launched in 2009 as a pseudonymous white paper, it is a form of digital payment maintained by an independent network of computers on the internet, using cryptography to verify transactions. Its most ardent believers say it could replace banks and even traditional currencies, but it is merely something worth using to transact and would fall victim to a major shift in market sentiment.

Like most hedge fund managers who specialize in cryptocurrencies, Samani routinely tracks trading activity belonging to known bitcoin "whales." (Although bitcoin transactions are designed to be anonymous, each one is associated with a coded address that anyone can see.) When he sees the activity, he says, Samani immediately calls the likely sellers and often gets their motivations behind their sales and trading plans. Some funds end up buying each other's holdings directly, without going into the open market to avoid affecting the price of bitcoin. "Investors are generally more willing to trade with other investors," Samani says. "We all know who each other is, we all help each other out, share notes. We all just want to make money." Ross says it's legal for (they) to gather intelligence on this.

Of course, ordinary investors are not yet prestigious enough to get other multimillionaires to call them. While people can track the addresses of Bitcoin "whales" online and discuss market movements enthusiastically on Reddit forums, they ultimately know nothing about the whales' plans and motives. "In this market, there is no transparency," said Mushkin, a lawyer who focuses on Bitcoin. "In the securities business, all materials must be disclosed. In the world of virtual currencies, it is difficult to figure out what is going on."

Regular investors are at a greater disadvantage in smaller digital currencies and tokens. Bitcoin is the least concentrated of all the coins people invest in, said Spencer Bogart, managing director and head of research at Blockchain Capital. The top 100 Bitcoin addresses control 17.3% of all issued Bitcoins, according to Alex Sunnarborg, co-founder of crypto hedge fund Tetras Capital. In Bitcoin's rival Ethereum, the top 100 addresses control 40% of the Ethereum supply. And in cryptocurrencies like Gnosis, Qtum and Storj, the top 100 addresses control more than 90% of the supply. Many owners of large amounts of virtual currency are part of the team that runs the virtual currency project.

Some argue that this is no different than what happens in more mature markets. “A good comparison is the early-stage holdings,” BlockTower’s Paul said. “Similar to these deals, founders and a small number of investors will own the majority of the (cryptocurrency) assets.” Other investors say whales aren’t dumping their holdings because they believe in the long-term potential of these cryptocurrencies. “I think it’s common sense that these whales have so much bitcoin and bitcoin cash that they don’t want to destroy either,” said Sebastian Kinsman, who lives in Prague and trades bitcoin. But that thinking could change as bitcoin prices rise.

For some large holders of cryptocurrencies, this puts small buyers at a disadvantage, but it is not necessarily illegal.