What are crypto-whales? Can they manipulate the cryptocurrency markets?

In the world of crypto, the “whalesare individuals or organizations that hold huge amounts of a particular cryptocurrency.

They usually own more than 10% of cryptocurrencies. For example, MicroStrategy owns almost 130,000 bitcoins (BTC) and can move the price of BTC through its participation in the market. With their buying and selling power, crypto whales can influence the price of respective crypto tokens and disrupt crypto markets with relative ease.

Investment firms such as Pantera Capital, Fortress Investment Group, and Falcon Global Capital are examples of such whales in the cryptocurrency market. If they buy a cryptocurrency token en masse, the price of that token will increase. Conversely, if they get rid of a token, the price of that token will drop significantly.

Most cryptocurrency whales do not trade on traditional cryptocurrency exchanges because their massive orders may overwhelm the existing volume in the order books. Instead, they trade coins outside of exchanges’ order books, in a practice known as over-the-counter (OTC) trading.

Whales hold significant power in on-chain governance procedures on Proof-of-Stake (PoS) blockchains (more funds in play gives them more voting power). The presence of whales in these networks could be a good sign (in terms of stability), as they have a strong incentive to act honestly and help the network thrive. On the other hand, the fact that the whales control the majority of the funds can have a negative impact on the centralization of power.

Monitoring crypto whale trading activity

Because cryptocurrencies were designed to provide a greater degree of anonymity, it is difficult to directly link accounts to individual people or organizations. Therefore, it is difficult to identify who each whale is, where it lives, what work it does, which institution it belongs to, and why it conducts this transaction.

However, by inspecting the blockchain data of those who have made their addresses public, it is possible to identify at least some of the individuals who hold considerable amounts of various coins. In fact, several of these individuals are well-known Bitcoin whales.

It is therefore essential for retail cryptocurrency investors to monitor the most important portfolios and stay on top of major changes in their holdings in order to adapt their trading strategy accordingly.

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