Whales are the largest living creatures in the ocean. The same is true in the cryptocurrency world. A whale is a label placed on the person or entity that holds or holes the most cryptocurrencies. Bitcoin whales usually mean more than 1000 BTC deposited in a single wallet address. However, people who hold large amounts of cryptocurrencies other than Bits may also be referred to as “crypto whales” by the broader term.
Who are Crypto Whales?
Since cryptocurrencies are designed to provide a higher level of anonymity, it is difficult to directly associate an account with a specific person or entity. However, if you look at the blockchain data of those who made it publicly, you can see some of the people who own a significant amount of the various coins. In fact, some of these are the incredibly well-known Bitcoin whales. Satoshi Nakamoto, the creator of Bitcoin, is said to own about a million bits. The Winklevoss twins, a real person played by Armie Hammer in the movie Social Network, once owned 1% of all Bitcoin. Exchanges like Huobi, Binance, and Bitfinex are also known to have large Bitcoin wallets. Although most of these funds are owned by users, the movement of funds within crypto exchanges does not have a significant impact on the market.
Why are whales important?
The value of cryptocurrency coins is largely determined by the principle of supply and demand. This means that if a large portion of the supply of a particular coin goes out of circulation, the price of the coin in circulation will skyrocket. Conversely, if a large number of coins suddenly become liquid, the value of the coins will decrease. Because of this, whales have a unique ability to actually steer the crypto market for their own benefit. For example, what if one whale wants to get more coins for a lower price? All you have to do is start selling the influential amount of your assets. This creates downward pressure on the market and provides the market with liquidity to trade the coin at a lower price, such as a discount sale. After that, the whales only need to buy back the coins, allowing them to buy more at a lower price. They hold on to the purchased coins and reduce the supply. The price rises again and the value of the coin rises above the price it purchased. It is a very simplistic description of the impact whales have on the market, but the power they wield must have been proven enough.
Should we pay attention to whales?
For most people, the answer is “no”. In the end, crypto whales are interested in increasing the value of their coins (with one exception when I decide to withdraw completely from the market for whatever reason). It will take a long time if Bitcoin whales jump together to create waves and catch their tails. Focusing on the general market and thinking about why they are making this move is a good strategy to recognize and avoid whale manipulation in the long run. In long-term investing, you can avoid rash decisions by clearly deciding when you want to get out of the market and what the minimum return you want to get is, and then go ahead with your plan. In short-term crypto trading, if you set a loss point and stick to it, you will get the same protection.