Last Updated on 3 weeks by Ameer Hamza
The drive to invest in crypto has become more intense than ever before. While the current market dump is fuelling many doubts about the viability of Bitcoin, many analysts still strongly believe that crypto’s value is set to get stronger. Regardless of this, one thing has been certain throughout the crypto rave— the price of crypto is determined by some factors. One of such factors is the action of price movers called crypto whales. Thus, in this article, we will discuss what crypto whales are and how they are important to the crypto ecosystem.
What are Crypto Whales?
Crypto whales are individuals or accounts that hold a large portion of a specific cryptocurrency. These whales are more common with Bitcoin. Often, with coins like Bitcoin, a whale is a person that holds more than 1000 BTC. In these cases, such persons would hold a significant proportion of all the coins in circulation. For example, Satoshi Nakamoto, Bitcoin’s creator, reportedly holds over one million Bitcoin. Also, a collection of about three crypto whales own over 3% of the Bitcoin in circulation. The concept of crypto whales can be likened to the whales in an ocean. The movement of whales disturbs the whole ocean to the point where smaller fishes are affected. Crypto whales are the larger fishes that affect other smaller investors.
Why are Crypto Whales Important?
As earlier stated, crypto whales are price movers. This means that if a crypto whale were to decide to sell off its assets, it could cause market disruption. This is because any sale of such huge proportions will draw market-wide attention. Many investors will panic-sell their assets under the belief that the whale sold their assets because they were privy to information that other smaller investors were not aware of. Many times, whales make these sell decisions to drive the crypto’s price down and buy more crypto. On other occasions, when large amounts of crypto are sitting in a whale’s wallet, it could create a perception of scarcity in the market. This could also increase the price of a cryptocurrency.
Dangers of Crypto Whales
The major danger of crypto whales is the likelihood of market manipulation. The entire point behind cryptocurrencies is that they are removed from governmental or institutional manipulation. However, crypto whales can easily control market outlooks due to the volume of crypto that they hold. For example, there are speculations that crypto whales were behind the significant increase in Bitcoin’s value in 2017. During the year, the price of Bitcoin increased from about $1000 to over $19,000. This persistent manipulation could lead to the loss of crypto’s appeal. When crypto whales continue to wield control, it could lead to price volatility and investors may lose their funds.
There is no doubt that crypto investors are important to the general crypto market. However, as an investor, you do not have to follow the actions of these whales. This is because it could lead to a fear of missing out and you may end up losing your funds. Instead, it would be more helpful to do your research.