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If you are familiar with the crypto market, then you have likely already heard of crypto whales. Crypto whales dominate the crypto market since they hold most of a particular cryptocurrency. Like large animals, a crypto whale's sneeze can spread across the blockchain, and cryptocurrency prices can plummet or soar by their actions alone with these big wallets. As such, experienced traders are often seen using reliable trackers to gauge their market movements.
What are crypto whales?
The term "crypto whale" refers to someone or something who owns much of a particular crypto. Generally, crypto whales are entities that hold enough digital currency to influence market prices significantly. There's no clear threshold for Bitcoin whales, but most own at least 1,000 bitcoins (BTC).
As crypto whales hold so much cryptocurrency, they don't typically trade on traditional crypto markets since their transactions can overwhelm liquidity. Their crypto trading method is over-the-counter, off-chain, where they buy and sell crypto to each other.Â
Blockchains using proof-of-stake (PoS) are heavily influenced by whales since larger stakes mean more power. Whales could be a good sign of the blockchain's stability and growth. Even though whales control most of the money, they can have a negative impact.
What are the dangers of crypto whales?
Cryptocurrency whales can place big sell orders by dumping large orders at a low price and controlling supply and demand. This leads to a price decline that could elicit hysteria, leading to an increasingly erratic market. Whenever whales revoke their large sell orders, or the people's purchasing power catches up, crypto markets stabilize. With the price where it was, the whale can now accumulate more cryptocurrency at their desired value. A "sale wall" is like buying directly.
Unlike traditional currencies, cryptocurrencies are decentralized, so they're anonymous. Due to this, you can't link people or entities to specific accounts.Â
Market capitalization and whales
The whales are more likely to attack cryptocurrencies with smaller market capitalizations.Â
Market cap measures how much a cryptocurrency is worth. You can calculate the market cap of a cryptocurrency by multiplying the current price by the circulating supply. For example, if Ethereum (ETH) were $10 per unit and 20,000,000 units were in circulation, its market cap would be $200 million.
Although they can provide some information about a cryptocurrency's performance and success, market cap and cash are different. Therefore, it doesn't reflect how much crypto there is. Cryptocurrency's price isn't directly related to its market value, as is widely believed. Even a slight change in value can affect a company's market cap.
The previous example shows how a few million dollars can make ETH go from $10 to $18, resulting in $300 million in market value. The market didn't get $160 million worth of new ETH. Price hikes require both liquidity and volume, two separate but related concepts.
Liquidity refers to whether crypto users can buy or sell cryptocurrency without affecting prices, while volume refers to how much cryptocurrency has been traded.
There are multiple trades in a liquid market, and there may be high amounts of orders in different price ranges, so whales can't easily influence it. Therefore, whales are less likely to impact the price without a lot of cryptos drastically.
Comparatively, a cryptocurrency with a smaller market cap and fewer trades can easily be manipulated for smaller amounts of crypto without significantly affecting its price.
Why is whale watching important?
Crypto whale watching involves monitoring the market activity of crypto whales. It's easy to identify crypto whales and predict their next moves by following their movements on the market. This way, the user makes money while avoiding losses.
Crypto whales have influenced some of the world's biggest cryptocurrencies. Therefore, smaller investors must stay on top of the biggest crypto users and consider changing their investment strategy when their crypto wallets change.
There are also cryptocurrency websites that track and watch crypto whales with different metrics to help smaller investors. Also, users can rate coins and tokens according to their appeal and get insights into the most popular ones.
Final thoughts
Crypto whale refers to an individual or organization owning large amounts of certain cryptocurrencies. They have enough cryptocurrency to affect market prices and can be dangerous if they want to manipulate average users for personal gain. Therefore, keeping track of crypto whales and their activity may help you avoid losses.
