Cryptocurrency Whales: How large investors manipulate the price of cryptocurrencies
If you have been in the cryptocurrency market for some time, you have
surely heard of cryptocurrency whales.
Imagine the cryptocurrency market as if it was the sea. There are fish
of all sizes. There are small fish, which only have a few coins, as well as medium
and large fish. Regardless of their size, all fish swim to maximize their profits.
One small fish cannot change market trends. It would require large
schools to do so. If all fish swim to the same point, for example, if everyone
is buying Bitcoins, the sea would move, and the trend would be a rise in the
price. Demand would increase, and as a result BTC would become more scarce.
Therefore, investors would need to pay more. However, if half of the fish go in
one direction and the other half goes in another, the value of the
cryptocurrency would remain stable.
But, whales are different. In cryptocurrency jargon, whales are investors who have huge amounts of cryptocurrencies in their portfolios, either Bitcoin or altcoins. For this reason, the joint movement of a small group of whales is capable of altering the cryptocurrency market supply and demand.
That’s not all. There are a few ways whales can use tactics to manipulate
the market and obtain high profits in a few minutes.
We will discuss who whales are and how they are able to manipulate the
Who are the Cryptocurrency Whales?
In general terms, whales are former cryptocurrency investors (the early-adopters). They managed to
gather large fortunes in cryptocurrencies during their first years.
In the case of Bitcoin, it is investors who collected their coins when
they were worth a few cents per unit, buying them or through mining.
Recently, the gigantic cryptocurrency value increase has allowed the emergence of a small elite group of crypto millionaires. In that sense, the Bitcoin Rich List data is revealing:
97.3% of Bitcoin wallets have between 0 and 1 BTC;
2.64% have between 1 and 100 BTC;
are in the remaining 0.06%, they have more than 100 Bitcoins. Among them, 3
wallets have between 100 thousand and 1 million BTCs. Wow!
In this sense, we can characterize the Bitcoin market as very centralized. This 0.06% has great
power over the supply and demand of cryptocurrencies at any given time.
However, in the case of altcoins, this centralization can be even larger. It is not uncommon that a significant part of the tokens belongs to the original currency developers, or that large investors have bought a significant part of the currencies as a high-risk investment during the ICO (Initial Coin Offer).
Cryptocurrency whales and market manipulation
In the traditional stock market, which is regulated by government
authorities, market manipulation is subject to specific laws. Depending on the
country, activities such as the dissemination of false news and the creation of
fictitious purchase and sale orders can be considered crimes.
However, the cryptocurrency market is not regulated. If it is compared
to other economic activities it is relatively small. Due to this, a few actors
are able to significantly change market prices and have no legal repercussions.
For this reason, market manipulation practices are occasionally implemented. These are some of the most common practices:
Rinse and Repeat
This practice works as follows:
whale creates a huge cryptocurrency sale order below market price;
the market is flooded with cheap crypto. Soon after, the trend indicates a sharp fall in prices;
prices are low, the whale acts again simply re
buying its coins;
this way, the currency price recovers its value. While the whale gets big
This practice can be extremely profitable for large investors if it is done at the right time. In a recent article, Cointelegraph explains how a whale was able to earn more than $10 million in less than 5 minutes through a similar operation.
Investors place buy and sell orders on exchange platforms. When a seller finds a buyer who accepts their price, the transaction is made.
Whales create huge buy or sell orders, building a “wall” that
causes the price to rise or fall. However, right after that the whale simply
cancels the order. Here is an example:
whale creates a huge buy order for cryptocurrency X for $10.
this is a sudden increase in the demand for cryptocurrencies, other investors
increase their buy orders even more, for example, to $15.
the whale cancels its purchase order. But, it changes its role and acts as a
seller of cryptocurrency X, which unit is now worth $15. The whale benefits from this
The opposite example is also possible: a whale creates a sales wall to
lower a coin price, later on, it buys it for a low price.
But, let’s take it
easy! Pay Walls are not always created
by whales. They often reflect the most general market trends.
Conclusion: learn to swim with the
Whales are the main players on
the market. In this sense, it is important to consider your actions when
deciding the best way to invest. If it is possible, swim with them.
Very sudden movements in prices are usually caused by a large cryptocurrency whale and its actions. Therefore, it is important to avoid panic in this type of situation. A site like Whale Alert analyzes large transactions 24/7 and can be useful for understanding some sudden variations.
It is important to understand that whales can only move the market in a
direction for a limited amount of time. They are not able to generate medium or
In recent years, the appreciation of crypto
prices is mainly due to the adoption of
its technology, and the arrival of small and large investors to the market.
This despite short-term price fluctuations. In that sense, investment in crypto
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