What is a Bitcoin Whale?
Whales are the biggest creatures in the Oceans, and it’s no different in the cryptocurrency sphere. The label applies to people or entities that hold or hodl the largest amount of crypto. A Bitcoin whale usually refers to a single wallet address with over 1000 BTC. However, people owning large amounts of other cryptocurrencies can be referred to with the more general term “crypto whale”.
Who is a Crypto Whale?
Because cryptocurrencies have been designed to have higher levels of anonymity, it is difficult to directly link accounts to specific people or entities. However, by looking at the blockchain data of those who have made their public addresses known, you can identify at least some of the people that own significant amounts of various coins. In fact, some of these are extremely well-known Bitcoin whales.
Satoshi Nakamoto, the creator of Bitcoin is thought to hold around 1 million BTC. The Winkelvoss twins, played by Armie Hammer in The Social Network, at one time owned 1% of all Bitcoin. Exchanges such as Huobi, Binance, and Bitfinex are also known to have large Bitcoin wallets. Although these funds mostly belong to their users, and moving funds within crypto exchanges doesn’t have much impact on the market.
Why do they matter?
The value of crypto coins is determined by and large through supply and demand. Meaning, if a large portion of the supply of a particular coin is held out of circulation, this drives up the price of the coins left in circulation. It follows that if a large number of coins are suddenly liquidated, the value of those coins will drop. Because of this, whales have the unique ability to essentially manipulate the crypto market for their benefit.
For instance, what if a whale wishes to acquire more coins for a cheaper price? All they need to do is start selling an impactful portion of their assets. This causes downward pressure on the market and is likely to generate a fire sale increasing liquidity for the coin at a lower price. They can then simply buy back their coins and more at cheaper prices.
They can then hold on to these coins and reduce the supply. Prices tend to rise and increase the value of the coins they have just purchased. This is a very simplistic take on how whales can affect the market, but it demonstrates the power that they wield.
Do I need to whale watch?
For most people, the answer is no. At the end of the day, it is in the interest of crypto whales for the value of their coins to be high (the exception to this being if they are planning to completely withdraw from the market for some reason). Jumping on every wave a bitcoin whale makes will have you chasing your tail and take up a lot of time. Making sure that you are keeping an eye on the market in general and having a view on why things are moving the way that they are is a better long-term strategy that can help you spot and avoid manipulation by whales.
In long-term investing, having an idea of when you want to come out of the market or a minimum profit you want to make, and sticking to your plan is going to keep you from making rash decisions. For short-term crypto trading, setting your stop loss, and sticking to it is going to offer the same protection.