Bitcoin's value declined in the past week amid a selloff from an Asian whale and a hack in South Korea, causing a headache for sports bettors.
A group of just 1,600 heavyweight investors controls a third of the world’s Bitcoin supply, according to new research. These investors are called whales and they control combined assets worth $37.5 billion, highlighting the stark concentration of wealth in the nascent cryptocurrency market. One mysterious Asian whale snapped up 94,000 BTC in late March, worth more than $700 million at the time, but that wallet has now started selling off assets. It has reduced its holdings by 8,000 BTC in the past couple of weeks, prompting fears of a selloff.
It is the sixth-biggest Bitcoin owning address in the world, and selling does not inspire confidence in the markets. That could be a contributing factor behind Bitcoin’s decline. It fell 6% on Sunday, the sharpest drop since May 23, to hit the $7,200 mark. Sunday would have been a bad day to be betting in Bitcoin, as no player likes to see 6% of their profit margin wiped out before they have had the chance to convert their winnings back into dollars.
But these are the risks associated with Bitcoin betting. Sports betting is on the brink of becoming legalized across the U.S., but red tape in most states will hold the process up for a while, and in the meantime Bitcoin remains the most attractive option for many online sports bettors. It is quick and simple to use, it offers anonymity, and there are no pesky middlemen taking a cut. It allows sportsbooks to offer sharper lines as they are not paying bank fees, and it heralds a return to the golden age of sports betting in many ways. But the cryptocurrency’s volatility is a definite downside.
It has stabilized somewhat compared to the amazing gains of late 2017 and the painful declines of early 2018. Since February 2018, Bitcoin reached a high of $11,784 and a low $5,922 and it has continued to trade within this range. From April 6 onwards, the range has grown even narrower: a low of $6,513 to $9,795. A narrow range is a good thing for sports bettors, who crave stability in this cryptocurrency to ensure they can bet without seeing their profits battered in the time it takes for a ball game to start and finish.
The presence of the whales is unhelpful in this respect. “This concentration of wealth means that Bitcoin is at risk of volatility as the moves of a small number of people will have a large price effect,” Chainalysis chief economist Phillip Gladwell said. Whenever an exchange drops a load of currency, it can contribute to a bearish trend that sees the price plummet. Bitcoin is also at the whim of global markets, and recent activity in South Korea has had a negative impact upon its performance. The country’s cryptocurrency exchange, Coinrail, said there was a “cyber intrusion” in its system. This news is credited with driving declines not just in Bitcoin, but also in peer cryptocurrencies like Ethereum and Ripple.
Coinrail is only the 98th-largest exchange in the world, so it suggests the picture could look a lot worse if some of the bigger exchanges were penetrated by hackers. Yet two things are spurring the Bitcoin bulls on in their claims that the currency will start to climb north. First, the market is slowly maturing and it is becoming more resilient to things like hacks in South Korea and negative comments from individuals. Second, as more people hear about it and get involved, Bitcoin will be spread thinner across more wallets around the world, and that will diminish the influence of the whales.
If you are betting in Bitcoin, the prospect of it going up or down is something you have to weigh up, but for now it seems sensible to keep converting your winnings back into dollars or other fiat currencies quickly after your bets have been settled.