Crypto Whales: Everything to Know

By  Beluga Research July 23, 2023

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Summary

  • Crypto whales hold a large amount of cryptocurrencies which influences the crypto market
  • They possess the power to influence the crypto market in proportion to how much cryptocurrency they hold
  • A crypto whale who buys, sells, lends, or borrows a significant amount of cryptocurrency can cause the market to move in a certain direction
  • These crypto whales create opportunities for other investors to make and lose money

Overview

Crypto whales hold a large amount of cryptocurrencies which influences the crypto market. The term "whale" comes from the world of traditional finance. It means an individual or institution with a large amount of a particular asset. A crypto whale can be an individual, a group or an institution such as a company.

Crypto whales can have a significant impact on the crypto market. They possess the power to manipulate prices quickly and to a great extent.

A Brief History

Crypto whales came to exist when the cryptocurrency market developed, in 2009. Investors who acquired large amounts of bitcoin (BTC) became the first crypto whales. As developers introduced other cryptocurrencies such as litecoin (LTC) and ether (ETH), crypto whales emerged for the respective coins.

What are Crypto Whales?

A crypto whale is an individual, group, or institution that holds a large amount of cryptocurrency. A crypto whale can own one or more types of cryptocurrency. They can also hold other digital assets such as NFTs. The idea of crypto whales is usually associated with certain cryptocurrencies, including bitcoin and ether.

Crypto whales are often associated with market manipulation and insider trading. Not all crypto whales engage in these activities. However, the ability for crypto whales to influence the market has led to concerns about their impact on the crypto industry. Some argue that crypto whales have too much power. There is a general concern that crypto whales can and may harm other investors.

Some players in the cryptocurrency ecosystem are working on concepts to limit the influence of crypto whales. The idea is to reduce the negative impacts that crypto whales have on smaller investors. Advocates of accessibility in the crypto ecosystem are particularly seeking to protect investors who are less sophisticated, lack crypto mining equipment and are new to the crypto marketplace.

Getting Started

  • Understand the whale dynamic. The actions of a crypto whale can influence the price of the cryptocurrency or cryptocurrencies that they hold.
  • Follow the influence. Crypto whales tend to be early adopters of the cryptocurrency or cryptocurrencies they favor.
  • Swim with the whales. Crypto whales often see their holdings become more valuable as the cryptocurrencies they acquired rise in popularity.
  • Be wary of whale actions. Crypto whales who mine, borrow or lend cryptocurrency they favor can further influence the platform and the entire cryptocurrency ecosystem.

Unique Aspects

  • Ability to influence the market. Due to their large holdings, crypto whales can manipulate the price of a particular cryptocurrency. For example, if a whale were to sell a large amount of a particular cryptocurrency, the price of the cryptocurrency would drop. On the other hand, if a whale were to buy a large amount of a particular cryptocurrency, the price of the cryptocurrency would increase.
  • Impact the market by retaining their cryptocurrency. If a crypto whale were to hold onto a large amount of a particular cryptocurrency, that would limit the supply of the cryptocurrency. This would cause the price of that cryptocurrency to increase. This would occur because demand for the cryptocurrency would remain the same - but the supply would be limited.
  • Anonymity. Many crypto whales prefer to remain anonymous. Anonymity can make it difficult to determine the motives behind a crypto whale's actions. For example, if a crypto whale were to sell a large amount of a particular cryptocurrency, it could be because they wanted to liquidate holdings. It could also be because they were trying to manipulate the market. The lack of transparency around crypto whales and why they engage in certain actions makes it difficult to understand, predict and address.

Advantages

  • Market Influence. Crypto whales have the ability to influence the market due to large holdings. Whales can buy or sell large amounts of cryptocurrency, which can cause the price of that cryptocurrency to go up or down. This can be beneficial for investors looking to make a profit.
  • Liquidity . Crypto whales can provide liquidity to the market by buying, selling, lending or borrowing large amounts of cryptocurrency. Such actions have the power to help stabilize the market and prevent extreme price fluctuations.
  • Funding. Crypto whales can provide funding for cryptocurrency projects. By investing in a project, they can help it grow and achieve its goals. This can be beneficial for the entire cryptocurrency ecosystem. Sometimes, it is beneficial if a crypto whale discloses their identity and intentions. This helps other holders of the cryptocurrency know what to expect from the crypto whale.
  • Network Security . Crypto whales can help secure the network by holding a significant amount of cryptocurrency. This makes it more difficult for attackers to launch a 51% attack, which can compromise the network.

Disadvantages

  • Market Manipulation. Crypto whales have the ability to manipulate the market by buying, selling, lending or borrowing large amounts of cryptocurrency. This can cause the price of a cryptocurrency to go up or down. These shifts can happen quickly and without much warning. The changes can be problematic for investors who are not aware of the manipulation and have no mechanism to stop it.
  • Lack of Decentralization. The presence of crypto whales leads to a lack of decentralization on particular platforms and in the cryptocurrency ecosystem overall. If a few individuals or entities hold a significant amount of cryptocurrency, they can have a disproportionate amount of influence on the market.
  • Volatility. Crypto whales contribute to market volatility by buying or selling large amounts of cryptocurrency.
  • Security Risks. Holding a significant amount of cryptocurrency can make a crypto whale a target for hackers. If a crypto whale's wallet is compromised or manipulated, that can have a significant impact on the market. If several crypto whales see their wallets hacked, especially at the same time, this can further destabilize the market.