Good day everyone,
I hope you are all well and had an excellent day, welcome to CryptoGod-1's blog on all things crypto. Today I am going to be doing a write up explaining exactly what a Whale is when it comes to crypto, and how the different levels towards becoming a whale work.
What is a Crypto Whale?
Cryptocurrency whales, also known as a 'crypto whale', are individuals, single businesses, cryptocurrency exchanges, or even institutions which are in possession of a large amount of a specific cryptocurrency. This amount can vary between tokens / coins as every individual token has its own individual supply limit. To be considered a whale it is often taken that an owner must have a large percentage of the total supply of a given currency.
They are important to the market as they generally own enough of the digital currency to have significant influence on market prices. This is done via trading large amounts of the coins and tokens, which can flood the market with liquidity or remove liquidity from the market depending on the trades. It is important to note that most 'crypto whales' do not trade on a traditional marketplace such as an exchange due to the their hefty transactions might overwhelm the liquidity of trading volumes. Instead, they are known to take part in over-the-counter (OTC) crypto trading, which involves buying and selling between each other, which can generally happen off-chain. This is not always the case though, and some 'crypto whales' have been known to drop their coins and tokens onto an exchange, which has a serious impact on the market for other. Therefore Whales are often accused of market manipulation because of their buying and selling power and ability to drive prices up and down with single trades, leading to short term fluctuations in the market and opportunities for them to garner even more profit from their trades or increase their total supply of a specific coin.
They are also major players in the function of proof-of-stake (PoS) protocols. This is due to the fact their large quantities of a coin or token can be staked which results in the whale having greater voting power. Network that make use of PoS view the existence of whales as both a positive indicator of the blockchain's stability and growth while also taking into account the negative impact of having the majority of the money and voting allocation controlled by whales.
Whale's Effect on Liquidity & Price
There are a number of ways whales can have an impact on the price of a particular cryptocurrency. One of the most common strategies for whales to use is to manipulate a crypto with a smaller market cap. These are more venerable due to the fact a market cap is made up of the current market price of a single share multiplied by the circulating supply. This is a statistic used to assess a cryptocurrency's proportionate value on the crypto market. Therefore a whale can manipulate the market through allocating a few million dollars to theoretically drive the price of a crypto up to higher levels, increasing the market value in the process. This is done thanks to liquidity and volume being used to determine how much cash is required to produce such a price hike, and could see a whale make very healthy profits in the process before the price will likely correct and return to the original lower prices. A cryptocurrency with a smaller market cap and less trade volume can easily be manipulated for smaller sums of crypto without substantially influencing that particular crypto's price and market cap.
Another impact whales can have is to create artificial buy walls and sell walls, These are done to manipulate traders and change the market sentiment. Whales can set these to discourage traders from allowing the price to hit these levels as the liquidity impact on the market could see a total reverse in the markets direction. Traders should also be aware of large buy walls and sell walls that appear quickly which can be used as part of a whales manipulation strategy.
Whales Impact on Investors
Lots of investors have a habit of 'whale watching,' a process where a general trader tracks the movement of crypto in a known whales wallet via the blockchain. Investors watch the whales wallets to see are they making big moves, such as selling off their holdings. It is important to note that note every move of funds by whales are because the holder intends to sell.
They could be changing wallets or exchanges, or making a large purchase. Investors are watching to see if the movement of a whale will produce market distortions, such as sending the price rapidly up or down unexpectedly, while also watching the number of transactions as sometimes a whale will sell their holdings in multiple smaller sums.
Users can also watch a whale to track their movement on the market while trying to predict the whale's next action plan. This is a strategy which is intended to follow the actions of a whale while making money in the process.
Whales have influenced some of the largest cryptocurrencies in the world, including Bitcoin, meaning smaller investors should keep an eye on the biggest crypto users and stay informed of any changes to their holdings and investment strategies.
Well Known Crypto Whales
There are many unknown 'crypto whales' out there, remaining anonymous and enjoy their accumulation of Bitcoin without the public eye upon them. Similarly, there are many who enjoy putting themselves or their business within the publics eye. Some of these include:
- Brian Armstrong: Brian Armstrong is the CEO of Coinbase, one of the biggest cryptocurrency exchanges in the world.
- Changpeng Zhao: Also known as CZ, he is the founder and CEO of the Binance exchanges. CZ invested large amounts of BTC in 2014 and then launched Binance in 2017.
- Winklevoss twins: Cameron and Tyler Winklevoss are famed for their claim against Mark Zuckerberg having stolen their idea of their university's social media platform. In 2012, the twin brothers received a $65 million settlement and invested significantly in BTC.
- Micheal Saylor: An American entrepreneur and business executive who was the chairman and co-founder of MicroStrategy, a company that provides business intelligence, mobile software, and cloud-based services. They are famed for focusing their investment plans into Bitcoin.
- Falcon Global Capital: A British investment firm establish in 2016 who are considered financial and investment experts.
- CoinCapital: A crypto asset fund management company which manages exposure to a crypto portfolio diversified amongst a variety of coins and tokens.
Levels of Crypto Whales
It has often been stated that those would are involved in Bitcoin are all considered some level of sea creature, even if being a 'crypto whale' is reserved for a certain few. The image below shows a breakdown by allstarcharts.com and their take on the different names associated with different levels of holder.
Whether you're a miner, a whale, a dolphin, a crab, or a shrimp, there is a level for everyone. This is an interesting and fun idea of pushing yourself towards achieving a higher level in the chart, for example if you're a shrimp and are DCAing into Bitcoin on a regular basis, how long before you're a crab?
I hope you enjoyed my article, have a wonderful day.
Peace. CryptoGod-1.
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