Elon Musk’s enormous influence over Bitcoin’s price has been a blessing and a curse for the cryptocurrency business.
True power, it is said, is never shown explicitly, but rather in the shadows. It’s why the Wizard of Oz hid behind an emerald curtain, and why former US Vice President Dick Cheney was the most powerful man on the planet, despite the fact that just a few people knew about him.

If you actually need to flex your muscles to demonstrate your power, than you’ve already lost, but good luck trying to explain that to the well-oiled muscled men on Venice Beach.

Which is why for the better part of a decade, the U.S. Securities and Exchange Commission (SEC) has held off on approving one of the dozen or so applications for a Bitcoin exchange traded fund or ETF, because it was impossible to determine if and when manipulation of Bitcoin’s price could or would occur from the shadows.

And while many Bitcoin maximalists may lament the SEC’s overabundance of caution, the regulator’s concerns are legitimate — ostensibly, a lot of Bitcoin is held in the hands of very few Bitcoin wallet addresses

According to Aaron Brown, a former managing director and head of financial markets research at AQR Capital Management, as much as 40% of Bitcoin is held in the hands of no more than 1,000 users.
According to another Bloomberg estimate, 2% of accounts (I presume they mean digital wallets) possess 95% of total Bitcoin.

One issue with sensationalized headlines that focus on Bitcoin concentration is that they appeal to the conspiracy theorist in all of us — “Bitcoin is rigged!” — “The Illuminati are in charge of Bitcoin!”
However, the other major flaw with these analyses is that they study Bitcoin across all of its network addresses, resulting in erroneous data and a false narrative that Bitcoin is truly in the hands of the Freemasons.
For starters, not all Bitcoin addresses should be considered the same — for example, an exchange address holding funds from millions of users should be separated from a user’s self-custody account.

An institutional custodian holding Bitcoin for family offices or hedge funds, for example, may appear to be a whale on the surface, but it could be run by an army of anchovies behind the scenes.
Second, unlike a bank, a Bitcoin wallet address is not a “account” – a single person can manage numerous Bitcoin wallet addresses, a practice known as “smurfing,” and one address can also contain the Bitcoin of multiple users, a practice known as “pooling.”

In fact, according to research from Glassnode, a blockchain data supply company (full disclosure: Novum Alpha is a client), the Bitcoin supply held by single Bitcoin wallet addresses increased significantly over the course of 2020, indicating an inflow of institutional investors, but the concentration in so-called individual whales, which matters much more for price manipulation, actually decreased.

Bitcoin maximalists rejoiced when Tesla stated in February of this year that it had purchased $1.5 billion worth of Bitcoin.
Finally, Elon Musk, the living incarnation of Ironman, arrived to support the future money.
But wait, there’s more: not only had Tesla purchased Bitcoin, but the future vehicle, Teslas, will soon be able to be purchased with the currency of the future – Bitcoin.
The news that Tesla will accept Bitcoin for its electric vehicles sparked a surge in Bitcoin, which saw it rocket to new all-time highs and come dangerously near to US$65,000 before reversing course.

By May, though, Musk appeared to have lost interest in Bitcoin, instead promoting the joke cryptocurrency Dogecoin, causing investors to wonder if Musk was ever truly serious about cryptocurrencies in the first place.
Then, over the course of a weekend, Musk announced that Tesla will no longer accept Bitcoin as payment for its electric vehicles, citing the cryptocurrency’s large energy requirements and potentially significant carbon imprint.
Those comments were enough to send Bitcoin into a tailspin, with the price plummeting to as low as US$30,000 at one point this week before quickly recovering.
What did Musk do in the aftermath of the flash crash, by the way?
He, of course, continued to tweet.

Tesla first tweeted that it had “diamond hands,” implying that it would not sell its Bitcoin holdings regardless of market conditions, and then that Bitcoin could be more environmentally friendly if its mining activities were properly audited.
Following those tweets, Bitcoin and Tesla’s shares both quickly regained some lost territory.
If this were any other asset class, tweets like the ones Musk has been sending (e.g., claiming that a publicly-traded U.S. firm was not selling a certain asset) would be met with SEC inquiry.

The issue is that the SEC has yet to fully utilize its authority over Bitcoin and cryptocurrencies.
However, if the SEC’s main issue to establishing a Bitcoin ETF is that the price of Bitcoin can be managed by a few whales, then the whale that is most likely controlling the price of Bitcoin is hiding and tweeting in plain sight.
The only problem is that this whale doesn’t hold nearly enough Bitcoin to be considered anything more than a minnow.