Good day to all crypto enthusiasts. This week, I would like to write about an important term in the crypto world, which has a very great influence in the crypto world. It's all about "whales," which is a term used for big investors in the crypto world. I want to share with you a little bit of what I know about whales in the crypto world, and I hope you'll love to read about them. It is good to know about whales' activities as it will help in our investment decisions, in addition to the usual technical analysis and onchain metrics.
Image edited with splendid Logo Designer App
Whales In The Cryptocurrency Market
The term can be used to describe an individual or an organization whose purchase power is large enough to impact the price of the asset. Their investment in the market is very significant relative to the asset's market cap. This is why their activities really influence the market in any way. Due to their purchasing power, they have the potential to manipulate the activities of the market and they have the highest staking power in proof-of-stake based tokens.
Although there is no standardized amount of a crypto one has to hold to be regarded as a whale, when it comes to BTC, people who hold up to 1000 worth of BTC are widely regarded as whales. Some of the famous whales in crypto includes: the Winklevoss Twins, Satoshi Nakomoti, Tim Drapper and many others, including some unknown institutions
Their number keeps increasing as the crypto currencies are being adopted by both individuals and institutions, and it will even keep on ascending as they keep on accumulating and new institutions keep on adapting to the cryptocurrencies. The huge holdings of the whales as compared to the total marketcap naturally reflects why their activities can widely impact the crypto market. The activities of Bitcoin whales also affect the altcoins due to the smaller market caps of the altcoins.
If we take a closer look at the year 2021, there have been a lot of activities that occurred in the crypto market, and if we take a closer look at them, you will realize that, they were all the activities of whales. For instance, on February 20, 2021, a strange activity occurred on the Kraken exchange as the price of ETH dropped from about $1600 to a price level of $700. This was more than a 50% drop within a very short period of time. This activity was thought to be the work of an unknown whale(s).
There have been some reports that claim the upsurge of Shiba Inu in November 2021 led to an increase in its market capitalization of over $20 billion as a result of the activity of some number of whales. I have just highlighted two activities, although there have been several whale activities in the year 2021 and we should even expect more this year, hence we should include the thought of whale activities in our investment plans.
The two known ways in which the whales cause manipulation are the creation of sell walls to cause Fear, Uncertainty and Doubt(FUD) and the use of Fear of Missing out" (FOMO). With the creation of sell walls, they set up huge sell orders on an exchange at a very lower price compared to the other sell orders. This will cause volatility in the market as the price will decline with respect to their order due to the huge amount of their order as compared to the rest of the market. Smaller investors will react to the decline in the price by panic selling their holdings at very low prices. The whales will then use this as a chance to accumulate more of that particular token. With this, you will realize that the whale will be at a huge profit.
With the use of Fear of Missing Out (FOMO), it is the direct opposite way to the sell wall method. They will create higher buy orders for the token. This will attract the attention of most small investors who are afraid of missing out on the market. These small investors will react by also setting up higher buy orders to catch up with the market, and this will be a huge profit for the whales as their buy orders will be filled.
Conclusion
It is very important to learn about the activities of whales in the crypto market. Their activities usually cause sudden changes in the crypto market, contrary to our analysis. Sometimes it is very good to monitor the activities of the order book to learn more about sell and buy orders with more vigilance as these are the ways through which the whales usually interfere in the market to s*ck the hell out of small holders.
Thank you for your time!
Crossposted From