What are crypto whales?
Cryptocurrency whales, or crypto whales, are individuals or entities that own large quantities of a specific cryptocurrency. Generally speaking, a crypto whale is an entity that holds enough digital currency to significantly influence market prices by trading significant amounts of coins and tokens. Although there isn't a straightforward or defined threshold, most Bitcoin whales own a minimum of 1,000 bitcoins (BTCs).
Because they own such large amounts of cryptocurrency, most crypto whales refrain from trading on traditional crypto markets, as their hefty transactions might overwhelm the liquidity of trading volumes. Instead, they engage in over-the-counter (OTC) crypto trading, where they buy and sell crypto to each other, many times off-chain.
Whales significantly impact blockchains that run on a proof-of-stake (PoS) protocol as larger quantities of staked funds lead to more voting power. For these networks, the existence of whales could be both a positive indicator of the blockchain's stability and growth. However, the bulk of money controlled by whales can negatively impact power and voting allocation.
Are crypto whales dangerous?
Crypto whales can put a sizable sell order by dumping large orders at a low price and controlling supply and demand. This causes a price decline, which sets off a chain reaction of hysteria that makes the market increasingly erratic. A chaotic crypto market only stabilizes when a whale revokes their large sell orders or the combined buying power of the people catches up. Now, the price is where the whale wanted it to be, enabling them to accumulate more cryptocurrency at their desired value. This approach is referred to as a "sale wall." The exact same process can occur in the buying direct.
Cryptocurrencies run on a decentralized blockchain technology, which allows users to stay anonymous. This makes it impossible to link specific accounts to specific individuals or entities.
Whales and market cap
Cryptocurrencies with a smaller market capitalization (or market cap) are more vulnerable to whales.
Market cap is a statistic used to assess a cryptocurrency's proportionate value on the crypto market. You can simply find out a crypto's market cap by multiplying the current market price of a single share with the circulating supply. For instance, if the price of a specific cryptocurrency, say Ethereum (ETH), is $10 per unit and 20,000,000 units are in circulation, the market cap of ETH would be $200 million.
It’s important to remember that market cap and cash aren’t the same, although they may provide some information about the relative performance and success of particular crypto. Therefore, it doesn’t reflect the amount of crypto on the market. It's a widespread misperception that a cryptocurrency's price directly affects market value estimation. However, even a slight change in value can significantly impact its market cap.
Considering the previous example, it’s easy to see how a few million dollars can theoretically drive the price of ETH from $10 to $18, increasing the market value from $200 million to $360 million. This doesn’t imply that $160 million worth of new ETH entered the market. Instead, liquidity and volume, two separate albeit linked concepts, determine how much cash is required to produce such a price hike.
While liquidity is essentially the extent to which a crypto user can buy or sell cryptocurrency without significantly influencing the price, volume refers to the amount of cryptocurrency exchanged within a specific time frame.
Since there are multiple transactions in the trade volume and potentially high quantities of orders spanning various price ranges, whales won't easily influence a liquid market with high volume. As a result, it becomes less unpredictable, making it increasingly challenging for a whale to dramatically impact the price without a significant amount of crypto.
In comparison, 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.
What’s whale watching?
Whale watching refers to tracking a crypto whale’s activity on the market. Identifying a crypto whale enables average users to watch their movement on the market while trying to predict the whale's next action plan. This allows the user to make money while avoiding potential losses.
Crypto whales have influenced some of the largest cryptocurrencies in the world, including BTC. As a result, smaller investors need to keep tabs on the biggest crypto users and stay informed of any significant changes to their crypto wallets to adjust their investment strategy accordingly.
Additionally, there are specialized cryptocurrency websites that provide tracking and "watching" services for crypto whales with various metrics to help smaller investors. Additionally, they allow users to vote for specific cryptocurrencies they find most appealing to gauge and offer insightful data on the most popular coins and tokens.
Crypto whales tend to be high net worth individuals who often make headlines due to their positions and status in their respective fields. Crypto whales can also be large organizations that hold large amounts of crypto. Here are some well-known crypto whales:
- Brian Armstrong: Brian Armstrong is the CEO of Coinbase, one of the biggest cryptocurrency exchanges in the world. Coinbase processes crypto transactions worth billions of dollars every day. Armstrong's net worth currently sits at around $3.6 billion.
- Changpeng Zhao: Zhao, more commonly known as CZ in the crypto community, is the founder and CEO of Binance, another popular crypto exchange. CZ invested large amounts of BTC in 2014 and launched Binance in 2017. It has since gone on to include various subsidiaries, including crypto debit and credit cards, Bitcoin mining, and venture capital funds.
- Winklevoss twins: Cameron and Tyler Winklevoss gained notoriety by claiming fellow Harvard student Mark Zuckerberg had 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. They now hold more than 70,000 bitcoins, along with other holdings. They also founded the crypto exchange Gemini in 2014, which handles millions of dollars worth of daily crypto transactions.
Big players like Falcon Global Capital (a British investment firm) and CoinCapital (a crypto asset fund) also own large amounts of specific cryptocurrencies, making them crypto whales and influential entities in the crypto space.
Influencers are another set of individuals that have a similar impact to crypto whales. They’ve large social media followings with hundreds of thousands or even millions of followers and subscribers, enabling them to influence a large group at once. They can manipulate a specific cryptocurrency’s market if they can convince their followers to buy and sell a number of coins and tokens. This will create large trading volumes and influence cryptocurrencies’ market cap. However, some influencers may indulge in unethical practices of buying a specific cryptocurrency, promoting it across their social media handles, and convincing their followers to purchase the cryptocurrency. This drives the crypto’s market price, allowing the influencer to sell their initial investment for a profit.
To summarize, crypto whales are individuals or organizations that own large amounts of a specific cryptocurrency. They have enough cryptocurrency to impact market prices and can be dangerous if they want to manipulate average users for personal gains. As a result, it’s important to keep track of crypto whales and their activity to avoid potential losses.
One company that aims to safeguard your crypto is Worldcoin. At Worldcoin, we don’t want you to spend your hard-earned cash on large amounts of crypto in a volatile market. Instead, we aim to put a share of our cryptocurrency in your hands for free––that’s right. We pride ourselves on protecting our users’ privacy and anonymity while allowing them to participate in a growing digital economy.
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