Whales, the Major Players in the Coin Market, Hold 90% of Coins on Upbit
In Upbit, a domestic Korean Won-based virtual asset exchange, it has been found that in 9 out of 10 virtual assets traded, large investors (whales) hold more assets than small investors. This suggests that the circulated virtual assets are concentrated in the hands of issuers or a few intermediary businesses. Experts point out that in a coin market skewed towards whales, it is difficult to form healthy price levels, and the risk of a sharp price crash following large-scale sell-offs looms.
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Pureun “Ian” Hong, Managing partner at Decent Law Firm, pointed out, "The market price is controlled by the decisions of a few whales. When whales sell large amounts of coins, the market is flooded with more than individual investors can absorb, leading to an inevitable drop in prices."
The Wemix crash is a prime example of small investors being caught in the moves of whales. In late 2021, Wemade, the company behind Wemix, made a large-scale sale without prior notice, earning about 200 billion KRW. The price of Wemix subsequently plummeted by around 70%. Wemix investors then accused Wemade of misleading them about the circulation volume and filed a complaint against CEO Jang Hyun-guk, with the Seoul Southern District Prosecutors’ Office currently investigating whether Jang violated any laws.
The fact that virtual assets operate in a regulatory blind spot further reduces the investment security of small investors. In securities markets, it is possible for a small number of individuals to hold a significant portion of shares. However, securities are subject to regulations such as disclosure requirements and insider trading prohibitions, which provide investor protection. In contrast, there are no such regulations in place for virtual assets.
Attorney Hong said, "While there is some legal ambiguity around coins, they are not currently subject to regulations under the Capital Markets Act or the Commercial Act. As a result, measures to protect investors are extremely limited."
