Crypto 101: Guide to understanding crypto whale
Have you ever heard of crypto whales? Here’s everything you need to know about them as well as what the general opinion about them is.
Crypto 101: Guide to understanding crypto whale
Everyone in the economy has a responsibility to monitor every detail of the market and among the most important statistics is the presence of whales. These are crypto owners who hold a large fraction of certain assets. If left unchecked, they can have the power to control the market.
Their existence cannot be simplified to either bad or good immediately. There are a lot of nuances to consider including the intent of the whale in question. All crypto owners should at the very least be aware of who they are and how influential they are to the cryptocurrency market.
What does a ‘whale’ mean?
The term ‘whale’ is used to describe individuals who are big spenders. It can be used in many industries but they all share the same description. ‘Crypto whale’ means that the person in question bought many assets either in one bulk or accumulated a lot over time.
What it takes to become a crypto whale
There is no strict rule to determine the crypto whale meaning. Most of the time, the criteria to be referred to as one is arbitrary at best. Some say that owning 100 Bitcoin (BTC) is enough to be considered a whale but 100 of Tether (USDT) is easy to overlook.
The reason for the different treatment is the disparity between both assets’ values. Having 1 or more BTC is eye-catching because one can easily fetch €30,000 to €50,000 per transaction. Tether on the other hand is tied to $1 per USDT.
Influence held by crypto whales
What makes crypto whales so influential in the crypto market is the law of supply and demand. This principle works as a reflection of the state of the economy. If there’s a high demand, then it’s easy to assume that many people are trying to buy it. A whale can tip the data off by being the sole buyer of all assets. Meaning, they can falsify findings in a technical analysis.
Whales also have control over a large portion of the supply. When the demand rises, then all sellers will try to compete to meet it. However, a whale who has a large hoard of the market’s desired asset can strongarm small traders away by being the sole supplier of it. Besides their probable threat to smaller-scale traders, whales also have control over liquidity and price.
Liquidity of the asset
When a crypto whale buys a large portion of the cryptocurrency, they tend to hodl it for the next time the market shifts. Doing so means the assets are trapped in one user instead of circulating the blockchain. When this happens, there becomes a drought in the market where the demand cannot be satisfied.
Price of the crypto
Their ability to control liquidity plays directly into their control over pricing. A crypto whale who bought all the crypto during the dip stops the assets’ circulation. It leaves other buyers still demanding and bidding higher than usual for the sake of getting crypto. This becomes an artificial price increase that sellers can capitalise on.
Likewise, a whale can easily drop the market price by overselling the assets they hold. This will tip the scales once again but this time, the supply skyrockets but the demands don’t increase with it. Therefore, the prices will drop which creates an artificial dip which can be easily mistaken for a market crash.
Whale spotting or whale alerts online
Many traders are away from whale activities and some took it as a responsibility to call out such practices. Many can easily do this on valuable volatile assets like Bitcoin because the blockchain can be viewed by the public. Users are still kept anonymous, giving whale watchers only wallet addresses to use as basis on who transferred and received a bulk of crypto.
Some have developed artificial intelligence (AI) to send followers notifications whenever a large purchase is made. One such example is @whale_alert on Twitter who can declare how much money is spent, how much of which crypto is transferred, and which wallet got it.
It can also declare who’s involved if the wallet address is associated with the owner who declared their address in the past or as part of the business. Thus, it will sometimes mention celebrities or company names in its announcements.
Some AIs are developed to find whale activities on all exchanges. You can find the statistics on a crypto whale chart like in CryptoQuant which shows how much was spent on a crypto. It also compares it with the price of the asset at the time for a helpful perspective on market rate and volume.
Is crypto whaling good or bad?
The intricacies between good and bad in crypto whaling are up for debate. Here are some pointers to consider for either side of the argument. You may form your own opinion and add to the discussion with the other traders:
Reasons why it’s good
Having control over liquidity and price means that there are always ways to nudge the market to a more desirable position. Over the years, the currently-known crypto whales have good intentions for cryptocurrencies. They want it to succeed at being a good asset for trading just as much as any owner in the world.
Whaling is also a common practice for all kinds of assets. When there are enough whales in the market, then the price can be stabilised. Big corporations can be each other’s watchdogs at ensuring that the other doesn’t make a bad business decision using cryptocurrencies.
Reasons why it’s bad
The whole idea of a cryptocurrency as the white paper on Bitcoin described when it launched is to replace central banking. Many joined the crypto finance model as a way to give control of one’s money back to people. Crypto whales become pseudo banks who control the asset the same way banks do albeit still in a decentralised protocol. Manipulating liquidity and market prices, thus, directly controls a smaller crypto owner’s wealth.
Most famous crypto whales
There have been a lot of known whales in the crypto industry. All of them have started trading digital assets ever since Bitcoin became popular. Here are five of the biggest names in the blockchain economy and what they are known for:
Satoshi Nakamoto
The creation of the most successful cryptocurrency, Bitcoin, is none other than Satoshi Nakamoto. Unfortunately, nobody knows who they really are. All that is known is that they are the owners of the genesis block mined on 3 January 2009 and owner of 1 million BTC.
The face and name they used belong to an actual Japanese citizen who denied all connections with the cryptocurrency. Thus, people are looking into other known engineers, including Elon Musk as the real genius behind the asset. Some have come out and claimed that they are Satoshi Nakamoto but people are doubtful and the investigation is still ongoing.
Elon Musk
The aforementioned Elon Musk is largely known as the richest man in the world as of January 2021, overthrowing Jeff Bezos for the throne. Musk is known as an engineer, businessman, and co-founder of Tesla and SpaceX.
He’s also one of the popular influencers in the crypto industry but only holds 0.25 BTC as he admitted on social media, specifically Twitter. However, he is an evangelist and investor of one particular crypto. He reportedly has 2.5 million DOGE. His company, Tesla, on the other hand, holds thousands in BTC because it accepts the asset as a mode of payment.
Vitalik Buterin
Coming back to crypto founders, Vitalik Buterin is a co-founder of the world’s second most valuable crypto, Ethereum (ETH). It is now at the forefront of becoming the next big blockchain because of the Ethereum Merge in 2022. He holds up to 326,000 ETH stored in several wallets.
He also gained €6.35 billion worth in Shiba Inu (SHIB) from the asset’s anonymous developer but burned them all quickly because he didn’t want to be a locus of power. He’s mostly dedicated to ETH only and its role in decentralised application development.
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Changpeng ‘CZ’ Zhao
Besides founders of the assets, the founders of exchanges also gain great benefits from cryptocurrencies they help liquidate. One such example is founder and CEO of Binance, Changpeng ‘CZ’ Zhao. His platform is currently the most successful centralised crypto exchange in the world with billions of euros regularly traded. Rather than owning specific assets, he reportedly has up to €100 billion in Binance Holdings.
Cameron and Tyler Winklevoss (Winklevoss Twins)
Just like CZ, Cameron Howard and Tyler Howard Winklevoss are greatly known for their businesses in various trades. Crypto just happens to be their latest venture now holding 70,000 BTC as well as being founders and CEOs of Gemini. It’s a crypto trading app like Binance for a wide range of digital assets. They’re also popular Olympic rowers during their time at Harvard University.
FAQs
Is a whale bad for crypto?
Crypto whales can be bad for crypto owners because they can control the market. Even if they don’t intend to, they may shift trends to a certain direction by either overselling or overbuying. They represent a power a common crypto trader cannot compete with.
How do I become a crypto whale
Technically, you only need to receive or hold a lot of cryptocurrency. You can get them through any means either through buying or simply receiving them as gifts. Ethereum co-founder Vitalik Buterin became a SHIB whale when he received it from the crypto’s developer until he decided to burn all of it.
Is there a way to compete with crypto whales?
The only way to compete with crypto whales is to either become one yourself or rally other traders to oppose them. Collective effort can have a huge impact on the crypto market, sometimes even more so than a whale. However, there’s usually little need for that much effort.
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Words: Clarence Clarke
