If you look at the crypto industry, it quickly becomes clear that we are collectively fascinated with crypto whales. Entire websites and social media handles exist simply to track the activity of whales i.e. those who hold a large amount of crypto.
This fascination has since given rise to an interest in dormant wallets. Just like whale watching, dormant wallets have become the hottest new thing in the industry, almost as much as new token listings. As Kane Pepi has said, investors are curiously looking to discover what’s new on Binance, to get the best seats when the new listings are ready, but they are also on a stakeout monitoring the information about dormant wallets. So, what are these wallets and why are we so fascinated by them? We break it all down in this article.
What is a Dormant Wallet?
The first thing we’ll want to do is define what a dormant wallet is in the first place. A dormant crypto wallet is one that has not seen any activity for a significant period of time, usually years. It does not mean a wallet that was created but never used but one that was active at one point but isn’t anymore. A lot of the reporting around dormant wallets focuses on those that have not been used for five-plus years.
So, what causes a wallet to be dormant? It is no secret that crypto wallet users lose their keys and recovery phrases all the time and sometimes, a person is locked out of their wallet for a long time. If they never find their keys or recovery phrase, the wallet can be dormant indefinitely. An example of this would be the cold wallets belonging to QuadrigaCX, a now-defunct crypto exchange. Its CEO was the only one with access to the cold wallet, which stored hundreds of millions of dollars. After he died unexpectedly, the wallet became dormant and has been so for years.
Another reason why a wallet would be dormant is HODLing. Many crypto investors hold on to their tokens for years and do not sell until the market is as high as possible. This is why we sometimes see people moving funds out of dormant wallets in anticipation of bull runs. It is also possible that the owner forgot about the wallet after a while. Remember that crypto investors might have multiple wallets and just like a dollar note you forget in your old bags or pockets, they might simply forget that they have them.
Why Are They Important/Fascinating?
Now that we know what a dormant crypto wallet is, we also need to explore why the media (and us) are so fascinated by them. Broadly speaking, these wallets are important for several reasons:
- Possible Market Impact
There are millions of dormant crypto wallets in existence but you might have noticed that it is the whale wallets that make the news. The industry closely watches crypto wallets with millions of dollars with of tokens whether they are dormant or not. The reason is that they could impact the market if they are sold or otherwise report any activity.
If a dormant wallet with tens of millions of dollars worth of Bitcoin suddenly sells off its stock, it could impact the overall value of the token. Simply put, we watch dormant crypto wallets because if they wake up and start buying or selling, the price of the assets could be affected.
- Possible Market Indicators
If there is anything that crypto investors are always looking out for, it is a sign of a bull or bear run. One of these possible indicators is the sudden activity of formerly dormant crypto wallets. If a Bitcoin wallet hasn’t had any activity in years but suddenly starts stocking up on tokens, it could mean that the owner is bracing for a market spike. Similarly, if a whale begins selling their stock, it could be a sign of low confidence in the token.
- Identity Clues
While cryptocurrency certainly affords users more privacy than fiat currency, dormant crypto wallet activity gives us an idea of who might be behind it. For example, we’ve been watching a crypto wallet allegedly owned by Satoshi Nakamoto for years, hoping to get some clue as to the identity of the Bitcoin creator. Funds were sent to the wallet a few months ago which only whipped up more excitement.
So if you’re a crypto enthusiast or a full-fledged investor, diversify your coin investments. You can never tell whether one day one of them make you a crypto whale.
