Whale Alert tracks large-scale crypto transactions made by exchanges or individuals who hold vast amounts of crypto to determine to what extent these transactions will shake up the market.
The effect of whales on markets is “alive and well”
The company identified a significant number of high-value transactions that underpinned Bitcoin’s price slump of nearly 20% between October 21 and October 22 as well as the subsequent recovery of almost 60%.
According to the co-founder, this demonstrates that the effects of whales on crypto markets are “alive and well”.
The CEO also highlighted the recent Bitcoin auction in South Korea where authorities auctioned 10,000 BTC – seized from a pornography ring bust – to Binance on October 18.
During this event, the price of Bitcoin on Binance dropped from $8062.56 to $7856.89, demonstrating how a whale-sized transaction from a singular event can “ripple across entire markets”.
‘Early adopter’ crypto whales – individuals or entities who have held large quantities of a cryptocurrency for an extended period of time – also have the ability to impact price by moving their coins.
He points to a Bitcoin address that currently holds 80,000 Bitcoin and has been inactive since 2011.
“That address alone – if that is actually a whale who’s been holding their coins for so long without doing anything with them – if they decide ‘Okay, let’s go sell them’, it would crush the market completely,” he suggests.
Between August 29 and September 6, 2018, one whale dumped roughly $1 billion worth of Bitcoin on an exchange.
On September 6 – once most of the coins were sold – Bitcoin’s price fell by almost 15%, while its 30-day rolling volatility increased by nearly 25%. This once again highlights the significant power these individuals or entities hold over markets.
The impact of whales will decline, eventually
While he doesn’t go so far as to claim all large market movements are the result of whales, the CEO states that stories such as the one above make him “very confident that whale transactions can have a really profound effect on price in the market”.
“The key takeaway seems to be that the entire whale ecosystem – both crypto whales and crypto whale-watchers – remain a key part of how crypto markets operate,” he adds.
However, while Whale Alert believes these individuals or entities are “necessary” given the infantile nature of crypto, it does believe they won’t be prominent forever.
“Bitcoin started with a few people. So, the biggest chunk of the coins is going to be in the hands of the people who started it,” says the co-founder.
“Eventually, those people will have to sell their coins, and more people are interested – more people are buying – and so, eventually the distribution of BTC is going to hopefully level out a bit more, and there’s going to be, hopefully, fewer whales.”
Interested in reading more whale-related stories? Discover more about how a crypto whale can make waves in the market.