How crypto whales make waves in the market

Considering the size and power of the ocean's largest occupants, perhaps it's not surprising that crypto whales can move markets

The very name “crypto whales” gives more than enough indication of the power and size of the largest players in the market. So, it’s not hard to realise that just one swipe of their tails is enough to make waves in the crypto market. And by waves, we mean sending prices plummeting or rebounding depending on whether they sell or buy.

Crypto whales can affect the price of an asset

Crypto whales can either be a person or an entity. Bloomberg reported back in December 2017 that just 10 entities (or groups of whales) held some 40% of all Bitcoin supply. That’s some serious power and potential to impact the market. If these whales leap out of the crypto ocean, they can cause lasting ripple effects.

This is because a crypto whale holds more than enough of a given asset to seriously affect its value should they decide to jump out of their investment. Their moves can impact the price and, should a group of whales decide to come together, could even bring the entire market down.

Crypto whales on smaller networks are particularly menacing, since holding vast quantities of currency can decrease the liquidity in the market.

Whales on the horizon

With Bitcoin being the original cryptocurrency, it has some of the largest whales in the market, and many of them are well-known. These crypto whales include the likes of the Winklevoss twins and even Satoshi Nakamoto himself. With Satoshi’s identity being anonymous, it’s thought that a group or entity was able to scoop up large amounts of Bitcoin early on.

These crypto whales are not thought to be dangerous necessarily, since they are known to be long-term HODLers. Moreover, the market cap of Bitcoin is now over $60 billion, so liquidity isn’t really an issue.   

The whales that are more concerning are the ones that suddenly offload their assets to the open market. In early 2018, for example, two anonymous whales sold over 13,000 BTC (then worth over $100 million). This caused the price to drop by as much as $200 in as little as 20 minutes.

Litecoin has also had its fair share of whales, with a recent whale sighting in December 2018 when one Litecoin whale moved around 35 million Litecoin (some 60% of the entire LTC market cap).

This movement represented a dollar value of $1.1 billion. This means that just one whale owns 15% of all the Litecoin currently in circulation! Luckily for the struggling cryptocurrency, it was a buy move and, as such, didn’t have a negative impact on the price. However, if the move had been to sell, it would have been a different story.

Another cryptocurrency that’s been among the top 10 since its launch in the middle of last year is EOS. But EOS is in a very tricky situation when it comes to crypto whales. Just 10 crypto whales hold over 50% of all EOS tokens in circulation. If they collaborate to make movements, EOS could crash very quickly out of the top 10.

Many investors seek whale status

Most of the whales in established cryptocurrencies like Bitcoin and Ethereum got in on the game early and scooped up currency while its value was very low. As the wider public watched Bitcoin billionaires get rich overnight (at least, that’s what it looked like), it encouraged a wave of investment in ICOs.

Hopeful buyers sought to become the next crypto whales, and many ended up investing in ICO scams. Others have been disappointed that their project hasn’t become the next Bitcoin or Ethereum, while others are still waiting for their chosen token price to explode.

Many naive blockchain start-up founders didn’t correctly asses the control or damage that crypto whales could have on their projects. They just sought funding fast. Their thinking was decidedly short term and many now find their projects and token price affected by the whim of a whale.

At the end of the day, crypto whales are the antithesis of decentralisation. If a project is funded mainly by whales who own a large supply of the tokens, it is effectively centralised by the movements of a minority.

Making moves in the market

Since there are no limits on the amount of currency any one person can hold, there is not much that can be done against crypto whales. Placing a limit on how many tokens they can buy would be akin to centralising the system.

On the bright side, most crypto whales are simply a silent menace, as they are holding onto their investment. But the day they decide to sell off, watch out for the Tsunami.

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

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