Whales in crypto terminology are individuals or institutions holding large swathes of coins of a certain crypto asset. This triggers panic in the markets with prices falling freely. So, watch out for such Crypto Whales, if you want to keep your investments safe and predict the next such movements sooner than later. Now let’s get straight into What are Crypto Whales?
What Are Crypto Whales?: A Perspective
An investor with more than 1,000 Bitcoins is usually called a Bitcoin Whale. In essence, any
person who has enough coins or tokens in their wallets to significantly influence the market
prices can be characterised as a crypto whale. It is said that whales account for more than
10% of the total crypto supply.
Moreover, whales usually make a significant impact on the market prices by either selling or
buying large amounts of tokens or coins.
Additionally, crypto whales don’t have to be individuals alone: Whales can also be an
institution or an organisation that holds a significant amount of crypto assets to such an
extent that they wield considerable power and influence on the markets.
Crypto Whales usually buy and sell crypto tokens or coins using Over the Counter (OTC)
trading and keep their transactions off the books. This helps them to not overwhelm the
market with their large volume of orders.
Further, whales can buy a significant portion of a particular crypto token and take over the
on-chain governance processes of the platform as well. This would ultimately give them
more voting power and they will be in a position to dictate the direction a particular token
This has its advantages as well as drawbacks.. On one side, the whales bring stability which
is a good sign and shows a stake to help the system grow. On the other side, the existence
of a whale on a network can be a negative sign of power centralisation.
How Do Whales Affect the Market?
Before we get into how whales can impact the market, there is another crucial point to make.
Whales can buy a significant portion of a particular crypto token and take over the on-chain
governance processes of the platform. This would ultimately give them more voting power to
dictate the direction a particular token takes.
Needless to say, there are two sides to this coin. On one side, the whales bring stability
which is a good sign and shows a stake to help the system grow. On the other side, the
existence of a whale on a network can be a negative sign of power centralization.
Here is how whales affect the markets:
- Market Liquidity: Due to the nature of crypto whales, their crypto wallets usually hold large amounts of crypto assets. When whales store a huge amount of crypto assets in their wallet, it reduces the overall liquidity of that particular asset. This happens because the number of circulating cryptos reduces, leaving lesser coins to trade and invest in.
- Effect on Price: Whales in crypto can create strong price volatility while transacting large quantities of cryptos in a single transaction. For instance, let’s say a whale tried to sell Ethereum after having accumulated large amounts of it. Since the liquidity is already low. Selling off large amounts of Ethereum would result in a download pressure on Ethereum’s price. When whales dump their money, other retail investors also follow suit, in order to cut losses.
How Can Investors Be Safe?
In order to be safe investors should be on the lookout for crypto whales. Investors can do
this by following whale alert sources maintained by the crypto community and investors.
These sources are public and alert users. Accordingly, the two main sources The two
- A website that alerts investors when a whale makes a transaction
- A Twitter account that sends alerts along with details of the sender and the receiver.
Moreover, investors can also keep an eye on the average amount of a specific crypto asset
deposited into exchanges. Unusual activities can be flagged as a whale activity in instances
where the mean coins per transaction rise a lot. Higher mean coins per transaction imply
that more coins have started being traded. This could hint at the movement of a whale.
However, these movements do not always have to set panic in your heart. At times a
whale could just be changed must be merely changing its wallet or exchange or even
making a large purchase. Furthermore, in order to avoid attention, sometimes whales try
to sell off their holdings in smaller amounts over a longer period to not draw attention.
As we’ve discussed, crypto whales are individuals or entities whose crypto wallet address
has a significant number of crypto assets. These whales can influence the market price
movements and liquidity for a particular crypto asset.
Nonetheless, investors can use some techniques to follow whales and save themselves from
the movements of whales. However, many times these movements need not set in panic.