Whales Dump Stablecoins in Record Amounts, Bitcoin Demand Uncertain

After a period of stablecoin accumulation earlier this year, whales have been dumping stablecoins at a dramatic rate. This move could correlate in several ways with demand for Bitcoin.

After a heady period in July 2023 where whales acquired huge amounts of various stablecoins, these large-scale investors have begun dumping these assets at high rates, signaling uncertainty in the market for Bitcoin.

Whales, a common feature in the digital asset space, are users that hold massive amounts of any one particular currency, and they exist in a wide variety from users with more than 10k BTC to those that own major percentages of an entire altcoin. 

Source: UTXO Management

These two examples of whale types are by no means mutually exclusive, as in fact, Bitcoin whales have frequently engaged in mass acquisitions of other types of cryptocurrency. In July 2023, there was a massive round of cryptocurrency accumulation by whale accounts, prompting a great degree of speculation about the markets’ future. These whales purchased large amounts of many types of stablecoin, but DAI and USDP rose to special prominence. Over 10% of the entire USDP supply minted in July went into the accounts of whales.

Although typically Bitcoin maximalism discourages the usage of assets other than the first major cryptocurrency, major purchases like this have historically signaled a correlation with a high demand for Bitcoin. Stablecoins are an easily fungible unit of currency on most crypto exchanges, and can easily be converted directly into Bitcoin.

In late June 2023, the value of Bitcoin was actually slightly higher than in July, when these purchases took place. In other words, it seemed likely that many whale accounts were preparing to buy the dip, preparing to make trades more quickly and easily than with cash. Considering that these whale accounts can often signal price trends for the entire industry, the crypto sphere watched these developments carefully.

These traders were anticipating a quick return of Bitcoin’s valuation to over $31k, but the late summer into the fall did not immediately present such an opportunity. After a somewhat bearish few months, the end of September 2023 has finally seen these whale accounts sell off their holdings of these assets. 

Whale wallets controlling more than $5M worth of various cryptocurrencies still control most of the circulating stablecoin supply, but nevertheless their collective ownership of these assets is currently lower than it has been since March. Apparently, the use-case of holding onto these stablecoins as a way to prepare for large Bitcoin buys in a chaotic environment has lost its immediate relevance to the market. Although this might seem to suggest that demand for Bitcoin is in a depressed state, there are other factors counting against this assertion.

For one thing, the tendency in these accounts throughout August and September has been to focus more on buying Bitcoin than in any dealings with stablecoins. As Forbes reported on September 5th, accounts holding more than $500M in assets purchased $1.5 billion worth of Bitcoin in August alone. Additionally, on September 22nd, watchdog accounts reported that major whale accounts had transferred a staggering $426.9 million of bitcoin, largely to accounts on Coinbase and Binance. 

These transactions are certainly noteworthy for occurring in such large volumes within a short period of time, and their presence on these exchanges could even suggest large sales. If some of these whale accounts are preparing to shed some of their Bitcoin reserves in addition to the stablecoin dumps, they certainly have an appropriate moment for it: at 41.1%, non-whale Bitcoin users currently own more of the total bitcoin supply than ever before.

In short, the whales’ decision to offload stablecoin assets have left the immediate future of Bitcoin in an uncertain state. Although they do suggest that a major market force in the crypto world has abandoned the hope of an immediate rally for Bitcoin, many of these accounts are still buying large amounts of Bitcoin. And if the whales moved $400M of their coins to facilitate future selloffs to non-whales, the purchasing power of this group has increased too. Whether or not the price will continue to fluctuate, decline or go up, it seems like overall interest is not going anywhere.