Crypto Whales - A Summary


cryptocurrency whale

Imagine an actual whale in the ocean. How much water do you think it displaces when it moves? Significantly more water than ordinary fish, right? And sometimes, the amount of water whales displace while moving (picture a whale breaking the surface of the water and then plunging back in) can actually displace or disrupt the movement of other smaller fish, right? Well, that is basically the concept of a crypto whale.

In the crypto-universe, whales are individuals or organizations that own massive quantities of a specific cryptocurrency. They hold large enough quantities of a cryptocurrency that they can significantly influence market prices through their trading activity.

For example, when a whale decides to buy large quantities of a cryptocurrency, the market equates this to high demand and therefore the price of the cryptocurrency goes up (sometimes very significantly.) The same is true in vice versa. Whales can choose to sell large amounts of cryptocurrencies and the market reads this as a loss of appetite for the currency therefore its price goes down. They can consequently directly influence supply and demand and in some cases dictate the actual value of a cryptocurrency. This ability to manipulate currency values means that whales can acquire more cryptocurrencies at their desired value. Crypto experts commonly call this a “sale wall”.

Because of this, most of the crypto whales don’t trade on traditional cryptocurrency exchanges since their massive orders may swamp the existing volume on the order books. Instead, they trade coins off the exchange books. This is also called over-the-counter trading or OTC.

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 a positive indicator of the blockchain's stability and growth. However, the bulk of money controlled by whales can have negative impacts on the allocation of voting rights. 

Whale watching

As you might already have established, crypto whales have influenced some of the biggest and most popular cryptocurrencies such as Bitcoin. Smaller investors persistently watch for whale activities in the market and stay informed on changes in their crypto wallets so that they can adjust investment strategies accordingly. This is called whale watching. There are also specialized cryptocurrency websites that provide tracking and "watching" services for crypto whales with various metrics to help smaller investors.

Popular crypto whales 

Courtesy of worldcoin.org

  • 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.

Should you care about crypto whales?

Clearly, absolutely yes. It is advisable, especially for smaller investors, to have some form of a whale-watching strategy. Any metric that can move the market in your favor or otherwise should be monitored. However, it is not advisable to trade with or against crypto whales, as they typically move the market in both positive and negative directions. For example, you do not want to be shorting the market when whales are actively accumulating during a bull market event, and neither do you want to be longing the market when there’s a cascade of liquidations and crypto whales are forced selling.

How to whale watch

Some common tracking tools from livemint.com

  • Coinbase dashboard
  • Binance 
  • Whale Alert (utilize their Twitter handle @whale_alert for whale activity updates)
  • CoinLobster (advisable for professional investors)

Summary

The crypto universe can be a scary place without the right information and data. Consider The Tech Informant as your trusted source for crypto news. This post about the 'pig butchering' crypto scam has been gaining a lot of attention from our readers, see if it may interest you. 

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