First Mover: Bitcoin Rattled by Transfer of Satoshi Coins That Might Not Be Satoshi’s

Even idle speculation that mysterious bitcoin founder Satoshi Nakamoto might be moving around a small batch of the cryptocurrency appeared sufficient to spook the market on Wednesday.  

Bitcoin slid 2.3% on the day, retreating after a four-day rally and pushing the price down to about $9,500.

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But earlier in the day, bitcoin plunged as low as $9,100 after the Twitter account “Whale Alert” sent a message indicating a recent transfer of 40 bitcoins, worth some $391,055, might be from a “possible #Satoshi owned wallet” that had lain dormant since the first few months of 2009 – soon after bitcoin itself had launched.  

Shortly afterward, on Wednesday, the same address transferred 10 more coins over the blockchain. 

Satoshi wrote the white paper that mapped out the framework and rules for the bitcoin blockchain, but disappeared soon after the protocol launched, and their identity has never officially been confirmed. Many believe the name was a pseudonym. 

The reason it matters to digital-asset traders is that Satoshi — whoever he, she or they may be — is assumed to have amassed a large amount of bitcoins from mining shortly after the protocol’s launch in early 2009.

Of course, a bitcoin transfer doesn’t necessarily indicate anything has been sold, and there are strong indications the address might not even be connected to the enigmatic founder.

But one fear could be that if Satoshi — or whoever it is behind the account — starts selling in large amounts, it could theoretically put downward pressure on the price.

“No matter who moved the coins, it did cause a mean ol’ nasty spike on the charts,” wrote Mati Greenspan, founder of foreign exchange and cryptocurrency research firm Quantum Economics, in an e-mail to clients. 

According to the cryptocurrency security researcher Sergio Demian Lerner, Satoshi’s untouched hoard might include as many as one million bitcoins, though BitMEX Research has estimated the number could be closer to 700,000.

Movement from old, inactive bitcoins is notable since such events rarely happen.

In fact, the 50 coins at the focus of Wednesday’s speculation — from data block 3,654, versus more than 631,000 now — were the first inactive coins mined in early 2009 to move since August 2017, according to data shared on Twitter by Coin Metrics engineer Antoine Le Calvez.

The bitcoin market sold off more than 7% almost instantly, as Whale Alert’s tweet quickly went viral, according to Bitstamp market data. As the rumor spread, something like $40 million worth of bitcoin futures contracts were liquidated on BitMEX, according to Skew.

“This occurrence highlights the importance of ‘address watching,'” Jose Llisterri, co-founder of crypto trading platform Interdax, told CoinDesk’s Daniel Cawrey. That includes “monitoring the addresses of whales/early miners and the so-called ‘Satoshi coins’ mined in the first months of bitcoin.” 

But there are strong indications the coins might not actually belong to Satoshi.

The primary evidence linking them to bitcoin’s creator are that the coins were mined in 2009, when few people were involved in the network, and that they’ve been inactive ever since.

But Lerner, the cryptocurrency security researcher, identified a unique “Patoshi pattern” in April 2019 that appears in the hash rate of a single, early miner. The assumption is the miner was likely Satoshi.

Lerner has identified all of those data blocks, and the 50 coins moved on Wednesday weren’t among them. 

Some bitcoiners immediately panned the Whale Alert’s suggestion. 

“Y’all need to up your analysis game,” Jameson Lopp, chief technology officer at bitcoin custody provider Casa, tweeted at the Whale Alert account.

In response to questions sent via Twitter, Whale Alert tweeted back that the “chance that this wallet is associated with Satoshi himself given its age and the transactions itself was interesting enough to post.”

“We are aware of the Patoshi research, but unlike what some are saying, we do not feel it excludes the possibility that Satoshi was the owner of those coins,” Whale Alert wrote via a direct message. 

Another angle is the vintage bitcoins might have been transferred by an early bitcoiner who has been active all along — just buying and selling newer bitcoins. So the fact the earliest coins were transferred might not mean the owner is suddenly doing anything differently.  

Gregory Maxwell, prominent Bitcoin Core developer and Blockstream co-founder, took to Reddit on Wednesday to explain that certain characteristics of the bitcoin protocol could cause coins like these to be left inactive in an otherwise active wallet owned by the same entity. 

“It’s possible that the author of this transaction has been frequently active all along, and their wallet just got around to spending this particular coin,” said Maxwell. From his perspective, he said, “nothing connects these coins to Satoshi.”

The takeaway for traders is to be on the lookout for vintage bitcoins — whether they’re Satoshi Nakamoto’s or not.

BTC: Price: $9,349 (BPI) | 24-Hr High: $9,795 | 24-Hr Low: $9,235