Whale cryptocurrency
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- 18.09.2020
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When it comes to Bitcoin, people often say that a person must hold at least 1, BTC to be considered a whale. In such a substantial market, considerable holdings are necessary to single-handedly influence valuations. Others are completely comfortable applying the term to crypto-holding institutions.
For many traders, the ocean serves as an apt metaphor for the crypto marketplace. There are few fixed rules, and investors of different sizes and predilections roam the waters in search of favorable opportunities. In the ocean of the marketplace, big fish make significant investments while small fish make more modest contributions.
Sharks roam with bared teeth, eager to take advantage of weaker foes. No matter what else is happening in a busy stretch of ocean, all heads turn when a whale swims by. In crypto markets, all heads turn to observe the behavior of the indomitable crypto whale.
The world of cryptocurrency is as much a subculture as a financial marketplace. Like all subcultures, the crypto universe has birthed a distinct vocabulary full of jargon and slang. Effects of Crypto Whales on Crypto Crypto whales hold a large proportion of many cryptocurrencies.
This gives them an outsized influence on the value of coins and the governance procedures of certain protocols. For modest traders — or smaller fish — understanding the behavior of the crypto whales is essential to making sound investments. Like the general economy, the crypto world is largely dominated by a few predominant stakeholders. As of May , four crypto whales held 3. Governments and regulatory bodies continuously scrutinize the markets for suspicious activity and penalize offenders.
While a part of the cryptocurrency market is still free of regulation and vulnerable to exploits like this, a greater part of the market has achieved a level of regulation and compliance that matches traditional financial markets, sometimes even outdoing them. Nevertheless, despite the best efforts of everyone involved, neither traditional financial markets nor cryptocurrency markets can be said to be completely safe from whale manipulation.
They want to buy even more of that coin but, at the time, they deem it too expensive to be worth the investment. Owning a sizeable amount of these coins already, they can set up a sell wall to artificially decrease their price. To do this, the whale opens an enormous sell order , putting lots of coins on the market at a price beneath the lowest price published in the order book.
If the sell wall remains, the coin will be then selling for much less than before. And then, out of the blue, the regulation kicks in and everyone wants to get their hands on that coin again. Demand rises and, with it, the price. A gargantuan whale or better yet, a group of whales working together to manipulate the market , can take the opposite route and profit by pumping the price. The whale or group of whales open vast buy orders at prices above the market, thus setting up a buy wall.
These colossal buy orders elevate the price at which orders are executed and trick other traders into increasing their buying prices, too. Seeing that the prices are ascending, many people will start to purchase the coin due to FOMO, or fear of missing out on an easy profit. The enthusiasm for the coin drives the price ever higher.
Meanwhile, the whales cancel their buy orders before a noteworthy amount has been processed and HODL keep, or hold, their assets as they watch their wealth grow. Alternatively, they can keep their orders up, to avoid slippage while selling their coins. Slippage is the fast change of price due to an imbalance in buy and sell orders. If a whale wants to sell a lot of coins at once, slippage would occur, meaning that the average selling price would be lower than desired.
Maintaining a buy wall while selling ensures that their coins are sold at a specific price.
ANY CRYPTOCURRENCY
If a whale sold lots of coins, they could then instigate a market-wide sell-off. Afte r the price has dipped, the whale could then anonymously buy their holdings back at lower prices. Similarly, a whale could trigger a short squeeze leading to an increase in price, which in turn would attract more retail investors. Reports found that the reason for this sudden spike was due to the fact a single order of 20, BTC had been executed across three exchanges.
This purchase had the power to change investor sentiment, leading to a rally that climaxed by the end of June. However, it is not just selling and buying on the part of crypto whales that can impact markets. A wallet-to-exchange transaction, for example, is when coins are deposited from a wallet into an exchange wallet. This generally means the owner intends to trade them in the short-term. A large deposit of a stablecoin, however, could indicate the whale intends to purchase BTC.
A deposit of bitcoin could put pressure on the markets downwards as investors prepare for a sell-off. A large deposit of stablecoin would do the reverse. If whales withdraw bitcoin from exchange wallets into cold wallets, this generally signals they are not about to trade them.
By reducing liquidity on exchanges, price can increase. Furthermore, by withdrawing to cold wallets, crypto whales are sending signals to the market that they believe bitcoin is worth holding onto. It is important to remember that these actions do not necessarily lead to a specific outcome.
Whales in cryptocurrency can move money around different wallets to trick the market into thinking they are going to enact a major sell or purchase of BTC. It is precisely this odd interaction between anonymity and transparency, combined with a lack of regulatory oversight, that makes market manipulation incredibly easy.
Are retail investors also afforded anonymity? Anonymity is something of a myth when it comes to retail investors and crypto. This means that if retail investors are caught up in any nefarious business, authorities can track them down. Furthermore, as a small fry, if you are not dealing in any criminal activities and not attempting to conceal crypto wealth during a divorce, there appear to be limited advantages to being anonymous.
A double-edged sword The transparency and accessibility of the system is similarly a double-edged sword. Unlike traditional financial markets, where only experienced investors can play, in crypto anyone can. Again, for the retail investor, this is a curse as well as a blessing. If Musk pans crypto, it drops; if he praises it, it rises. In November , for example, when Bitcoin soared to record highs, individual investors bought BTC as prices rose and sold when they dipped.
Similarly, between December and February , whales increased their holdings dramatically, a trend which retail investors followed. However, between March and May, crypto whales reduced their holdings while retail investors kept ploughing in. In mid-May the price crashed, hurting retail investors who had invested when BTC was already at peak price. Retail investors, caught up in the emotional frenzy of watching their savings plummet to horrendous lows, are much more likely to sell up rather than sit on their hands and ride the wave.
This means that as each low hits the larger, more experienced investors can buy up and accumulate more. Even trusted news outlets, by dint of ignorance, unknowingly prop up and give light to crypto, thus encouraging more retail investors to get involved. The BBC, for example, recently ran an article about the new Squid Game crypto and how it was surging to new heights. But anyone spurred to get involved after reading such an article would have lost all their money a couple of days later, as the unknown creators walked away with millions of dollars.
An examination of crypto whales, the concentration of wealth and the potential exploitation of the little guy to make the wealthy already wealthier, at first appears to be at odds with the anarchic, democratising promise of crypto. Rooted in right-wing economics However, under closer scrutiny, crypto and big tech alike express sentiments that are anti-establishment but far from anti-capital. In fact, crypto is in some respects the quintessential expression of free market sentiment.
He argues that the emergence of crypto and cyber-libertarianism is a logical continuation of the ideas established by right-wing economists like the John Birch Society and Milton Friedman. While decentralisation is invariably promoted by crypto advocates as the way to free society from pesky central banks printing money and devaluing currency, it is interesting to examine the criticality of these structures in the maintenance of a stable economy.
In a globalised world, a finite currency such as bitcoin results in volatility due to the mechanisms of supply and demand, which drive the price up and down. Fiat currency, by altering the levels of currency circulating in the system, ensures the value of the currency remains relatively stable.
Paradoxes in big tech The paradoxes which plague crypto are mirrored in the dichotomous nature of big tech. Disruption and innovation are buzzwords associated with ideas of progression and leading the world towards a more equal, socially just place. Interestingly, the democratising potential of blockchain technology is often held up as the excusing factor when crypto is tied up in some new scandal.
While crypto might be risky, dodgy or the remit of criminals, the argument goes, blockchain technology will save the world and bridge inequality. While this may not be entirely a fantasy, it is worth remembering the birth of the internet brought similar lofty promises — until we all realised that, as the market has matured, its existence has in fact made inequality worse.
Impotence of Western governments The desire for decentralisation has no doubt in part emerged from a disillusionment with, and to some extent justified distrust of, the current financial system. From inequality to quantative easing to outdated processes, Western governments have garnered extensive criticism. It is not just rapid economic and social changes that matter but the inability or unwillingness of national political actors and institutions to respond to those changes that has caused rising support for populists.
Western governments have indeed shown a lack of ability to control and regulate either big tech or crypto. While the archaic or elitist aspects of institutions are frequently bandied around, the ways in which institutions serve to maintain democratic values is all too often forgotten. Decentralisation, or the belief in it, is essentially a statement of faith in a system where morality or ethics are no longer a factor.
The core governmental institutions were created with democratic principles in mind. These principles, however, and the liberal governments designed to maintain and protect them, are increasingly impotent in the face of change. The disillusionment with traditional structures has added weight to arguments for decentralisation, a concept which has been around for a while but which blockchain brought into the realm of possibility.
Final thoughts The existence of whales in crypto and the droves of institutional investors ploughing into the crypto Wild West to hunt for yields clearly demonstrates how inequalities within the traditional financial system are not only mirrored by crypto, but in fact greatly worsened by it. Examining the possibility that crypto has become or indeed was always rooted in right-wing economics, and that its emergence and surge is far from a subversion but simply a logical extension of the next phase of capitalism, helps to frame and understand the apparent paradox of crypto whales.
The lack of ability on the part of governments to regulate crypto markets signals the extent to which capitalism, aided by technological developments, has potentially begun to sow the seeds of the overthrow of liberal democracy. These incidents have already happened with several alternative, younger cryptocurrencies. This kind of manipulation works, in a nutshell, like this: the whale, owning a large amount of funds and interested in investing in certain cryptocurrency, places a colossal limited sell order for a price lower than the lowest already offered in that environment.
At the same time, every other trader who Is selling the cryptocurrency in question is also forced to lower their sell price, resulting in shattering money losses for them. This means that, officially, that cryptocurrency value has been depreciated. The whale will remove their sell order after successfully provoking the wave and nimbly buy all the coins available at the low price its wave attained.
The whale then does this repeatedly, placing enormous sell orders, making the coin value drop, removing the order, buying for the reduced price, generating successive waves of depreciation until they are satisfied with how much funds they acquired, for the price they wanted. Firstly, the bigger the ocean is, the bigger the whale has to be to produce a significant wave. If a whale is not big enough for the ocean and tries to place a sell order at such low prices in a market with a lot of buyers, it may end up getting exactly the opposite of what it asked for: that people actually buy the order it offered, with the price it offered.
During the wave span, though, many investors were frustrated, as their bitcoin sell prices suddenly dropped. But the same action would have very different consequences in smaller-sized markets. This is not normally done by lone whales, but by groups of people that, in a collective effort, work together to increase the prices.
The group places large buy orders together, increasing the crypto price, and then take advantage of the wave of appreciation to sell their coins for the recently artificially appreciated prices at an agreed point.
Whale cryptocurrency dr forex median grid
\Glossary Jul 7, A crypto whale is a person or entity that owns an exceptionally large amount of a cryptocurrency.
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