Watching the financial exploits of the super-rich is a pastime that is as fashionable in today’s online world as is was hundreds of years ago, when the everyday people would watch land barons sail by in their luxury carriages. In those days, the attention might have been on bags of gold coins, but today, the money watchers are focused more on blockchain.
A case in point is a SilkRoad Bitcoin wallet that contains 11,000 Bitcoin and the same amount in Bitcoin Cash. That equates to around $850,000, and observers have stood transfixed, just like those royal onlookers from medieval times, as the funds have started to move from the wallet, after lying dormant for several years. The online observers are not lining the streets, but have taken to Reddit in their droves to discuss who might own the money and where it is going.
The perfect democracy?
In some ways, blockchain is the great leveller. The very transparency that makes the technology so attractive also means that there is nowhere to hide. Whether transferring a single Bitcoin or the equivalent of millions of dollars from your bitcoin wallet, transactions are subject to the same level of public scrutiny. When something like this happens, it is inevitable that tongues will start to wag.
Eggs in one basket
It’s one of the oldest proverbs going that we shouldn’t keep all our eggs in one basket, and if this latest headline tells us anything it is that this is an axiom worth remembering when it comes to cryptocurrency.
For one thing, it is probably better to avoid becoming an internet sensation on the basis of your fabulous wealth – that is never going to end well. But there is another reason it makes sense to spread your crypto across multiple wallets. The security of bitcoin wallets is well-known, but if you lose your private key, you can lose your wealth with it. From a risk management perspective, using multiple wallets is an obvious step to take.
Essentially, the more wallets you hold, the better the risk is spread. It is also a wise precaution to keep private keys in a safe, offline location and to explore the different types of Bitcoin wallet available. Software wallets, hardware wallets and desktops wallets all have their own pros and cons in terms of security and convenience. Large scale investors, such as our mystery whale, would probably do well to consider a combination of all three.
Who is the mystery whale?
Much of the discussion around the huge transactions from the mystery wallet has concerned the identity of its owner. This is still shrouded in mystery – the wallet started life with a SilkRoad address, but has also been linked to the now defunct Japanese exchange Mt Gox.
Craig Wright, the controversial name behind many of the more outlandish Bitcoin stories over the years also attempted to lay claim to it in a lawsuit earlier this year, before the funds started moving. However, as is the case with much of the gossip surrounding Wright, this has been given little credence.
Implications for the investment community
Guessing the identity of the owner is all very well for water cooler chat, but perhaps the more pertinent question surrounds the potential impact of such a major transaction on the wider bitcoin market. If a significant proportion of the wealth goes to an exchange wallet, repercussions are likely to be felt across the markets. It has happened in the past, when EOS transferred a large volume of Ethereum, for example, and it prompted panic selling among investors. Meanwhile, the spectators and the speculators continue to watch developments.
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