- What are Crypto Whales?
Discussions about crypto whales can be difficult to navigate because it’s not always clear what a crypto whale even is. But for simplicity, we can define them as “somebody who, with what they own, can create price fluctuations.” The “somebody” in that equation can be anything from a high-net-worth individual to a company with substantial crypto holdings, to a crypto exchange moving large amounts of funds from one wallet to another.
Many of us are familiar with Twitter account @whale_alertFounded by brothers Frank and Mark in 2018, Whale Alert tracks large transactions on eleven blockchains and announces the details of these transactions to their Twitter following of over 150,000 avid whale-watchers. Through their service, they have brought to crypto a practice that has a long history in equities markets: watching for large trades to gain insights into what the major players are doing and why.
while many may imagine individual traders when they hear the term “whale,” Whale Alert observes that “exchanges are by far the richest custodians of Bitcoin, and their wallets are the largest ones.”
Ask yourself a question, Blockchain is open, every one of us can see every transaction, but how many times did you notice that a big anonymous transaction occurred before the considerable price fluctuation, that is not an Exchange? Remember any? Maybe not, maybe once or twice!
“exchanges are by far the richest custodians of Bitcoin, and their wallets are the largest ones.”
However, it is believed that when moving money, Bitcoin whales don’t send all their coins in one large transaction, but rather in thousands of smaller transactions, to avoid attracting attention. This often leads to speculation on the market — price adjustments that shouldn’t actually happen. Even so, there’s nothing that can be done to stop the market from adjusting its prices based on big transactions.
Gradwell also mentioned that “a number of these larger holders do communicate with each other, they know [each other], and they take stock of market activity.”
An interesting feature about the nature of whales in crypto markets — as opposed to something like equities markets — is that transaction information on many blockchains is totally public, giving ordinary traders and enthusiasts access to what might elsewhere hypothetically be considered “insider information.”
the puzzle in the case of crypto whales is just a matter of figuring out exactly how to organize and interpret that public information, which is no small feat.
While also It’s no secret that individual Bitcoin-whales with their capital can affect the rates and general position in the cryptocurrency market. According to a study by the analytical resource Diar, last year more than 55% of the current BTC emission at that time was controlled by less than 1% of wallets.
This means that a very small number of people have a very large influence on what happens with Bitcoin’s price.
- According to another study made by ChainAlysis, at this moment in time, the Bitcoin whales group is a cluster made up of roughly 1,600 investors who hold around $37 billion in Bitcoin. This means that they hold almost one-third of all the Bitcoin in circulation — close to 5 million coins. The coins are kept in wallets containing at least 1,000 BTC each.
To put things into a better perspective, here are some statistics that will present how Bitcoin wealth is distributed amongst its richest users.
- 1633 addresses containing 1,000–10,000 BTC, or $22.8 billion USD
- 121 addresses containing 10,000–100,000 BTC, or $20 billion USD
- 3 addresses containing 100,000–1,000,000 BTC, or $2 billion USD.
According to Philip Gradwell, who is the chief economist of ChainAlysis, “this concentration of wealth means that Bitcoin is at risk of volatility, as the moves of a small number of people will have a large effect.”
- Whale Investment strategy
- The Rinse and Repeat Cycle
The Rinse trade is more effective when utilized by a whale, as they have enough assets to trigger a price movement. To achieve this, the whale sells off a large amount of Bitcoin at prices lower than the market rate. This move could cause a chain reaction in the market as small traders panic and sell off their Bitcoins. The panic sell-off would cause the price of Bitcoin to reach a new low, and the whale buys more Bitcoin than he or she had originally sold. Repeating this technique is what we call the Rinse and Repeat Cycle.
- Setting up Buy and Sell Walls
This technique actually does not require a Bitcoin whale to physically trade Bitcoin. Instead, they can place a bid to buy and sell at a price different from the market rate and withdraw these bids as soon as it has the desired effects on the Bitcoin market. As such, it is common to see whales — and even smaller traders — bluff by setting up buy and sell walls that tend to disappear. The chances of identifying bluffs and real buy and sell walls are very slim.
When this happens a normal trader like us sees big buy/sell walls and assumes that price going up/down and tries to catch the falling knife.
- Utilizing the OTC Market and Dark Pools
Bitcoin whales are aware that their trading activities are likely to create a chain reaction in the Bitcoin market. Therefore, they utilize discrete ways to buy and sell Bitcoin when they do not intend to disrupt its price patterns.
The best way to do this is to utilize Over the Counter (OTC) platforms and Dark Pools, which are hidden from the public eye. Platforms like this allow “off the record” trades, which guarantees the privacy of their customers. Therefore, it is possible for whales and institutions to move a large amount of Bitcoin without causing a stir in the Bitcoin market.
- Observe whales pattern
- The Cancellation or the Pop-up of Large Orders and Bids
The bid size of Bitcoin could significantly increase when a whale is actively engaging the crypto market. In addition, the sudden cancellation of big orders could signify that the price of Bitcoin will fluctuate.
- The Unexplained Surge or Decline of the Price of Bitcoin
The prices of cryptocurrencies experience major momentum when there are new developments, game-changing announcements, or news. However, if there’s no explanation for new activity, it’s possible crypto whales are influencing a cryptocurrency’s value — like when you see the price of Bitcoin steeply decline or increase for no clear reason.
- The Acceleration of the Trading Volume
The trading volume of Bitcoin is almost always evenly balanced (i.e. the buyers and sellers evenly split the volume). As soon as a whale influences the market, the volume tends to spike, and either the buying percentage or the selling percentage is bound to surge.
Note: This article is part of Bybit’s community group engage, All the details here are combined from various articles, to make it suitable for community engage. Links for all the articles can be found here.
References:
https://bitcoinplay.net/bitcoin-whales/https://bitfortune.net/bitcoin-whales/https://blog.sfox.com/bitcoin-whale-alert-sfox-interview-3e77bbe55fc1https://medium.com/@crypto_info/bitcoin-whales-who-are-they-ccfc531dca31
Written byMS_Bybit