A long-dormant bitcoin wallet suddenly began to function in September 2018. Despite the fact that there are millions of Bitcoin wallet addresses, this one was unique since it had both an identical quantity of bitcoin cash and over 111,000 bitcoins. One of the greatest holdings of the most well-known digital money in the world, the bitcoin in this wallet is valued close to $850 million. Although the owner of the wallet is still unknown, due to blockchain ledgers, everyone has been able to see as the wallet came to life and started regularly disbursing money in recent weeks. Whoever the owner of this specific stockpile of bitcoins is, the discovery of this mega-wallet has reminded many cryptocurrency investors of the dangers of keeping a lot of their funds in one location.
The Blockchain Shows Everything
For whale investors, one of the main advantages of blockchain technology may also be a drawback. All transactions are visible on blockchain ledgers to those who take the time to investigate them. While the identities of those involved in bitcoin transactions are still cryptographically obscured and hidden from these curious observers, the activity in specific wallets is readily accessible. As a result, an investor who wants to shift any amount of bitcoin, big or small, cannot do so secretly. It becomes considerably more challenging for the owner of the wallet to carry out transactions without drawing attention when the wallet contains about $1 billion in the preferred digital currency.
While scrutiny in and of itself is not always a negative thing, it is rarely something that investors are seeking for in the realm of digital currencies, where privacy and anonymity are paramount. In addition, paying attention to a wallet this big alerts potential thieves as well as innocent passersby to its presence. Given that cryptocurrency hacks are still a significant issue for both digital currency exchanges and individual investors, all it would take is one successful wallet hack for the owner to lose a significant amount of money quickly.
Privacy Key Peril
The owner of a bitcoin wallet may lose access to their cash in various ways even if hacking is not a worry. “Lose the private key and you’ve lost your money,” as Bitcoin investors are aware. Private key codes are required to access wallets. If you lose it, there is no way to retrieve it and there is no way to find it. Investors typically maintain their codes carefully because having the code gives you unrestricted access to your wallet’s contents. They have little to no remedy for obtaining their tokens back if they are too careful, to the point where they lose or forget the code themselves.
It makes logical for an investor to divide up a substantial amount of crypto tokens across different wallets for all of the aforementioned reasons. This can improve privacy and help with risk management (for example, if you lose one private key, you still have access to all of your other wallets). Compared to their bigger counterparts, smaller transactions are less likely to get media attention.
One more problem exists when a large number of coins are kept in a single wallet. Investors can track when a significant amount of coins are transmitted to an exchange wallet because to blockchain’s openness. Such a move has the potential to send investors into a panic as they start to worry about a huge coin dump. In this way, the cryptocurrency market as a whole can be significantly impacted by the decisions of a single investor.