What is a “whale”?
A “Whale” is a holder of a large amount of cryptocurrency or a trader with significant capital who has enough coins to influence the market.
Why is it a “whale”?
Large holders are specifically called “Whales” by analogy with the largest mammals in the ocean. Because of the large size of the positions when trading, “Whales” can influence the market movements in any direction. It is similar to the waves that “Whales” can make – small fish (ordinary investors) just have to ride such waves without being able to influence the course. Therefore, retail investors have to swim with the current and guess its direction, while “Whales” are able to create the market movement themselves.
How can “whale” investors manipulate the prices?
Selling a large amount of a particular cryptocurrency at a below-market price can trigger a panic sale by small traders, causing the price of the coin to drop significantly.
The initiator of the sell-off can then buy back the cryptocurrencies at a better rate, get their coins back and make a profit in the process. This scheme can be repeated countless times. However, it also works in the opposite direction – when large amounts of cryptocurrency are bought in the market, the price suddenly rises.
Manipulation of cryptocurrency rates through outstanding orders. “Whales” can also influence a coin’s exchange rate by manipulating orders on the exchange. A trader simply places large buy or sell orders, but does not actually plan to execute them. As soon as the price of the coin moves in the desired direction, the order is canceled.
So, for example, if a trader places an order to buy a large number of coins at a price higher than the market price, the cryptocurrency price will go up. Next, that trader cancels his order and instead of buying, sells his coins at the new, more favorable price.
“Whale” investors tend to be institutional investors who have a lot of money at their disposal
The Pareto principle (80-20 rule) suggests that 20% of cryptocurrency holders control 80% of the market (80% of the consequences stem from 20% of the causes).
This applies to large cryptocurrencies such as Bitcoin (BTC). According to Investopedia, the top 100 crypto wallets contain about 32.2% of all Bitcoin in circulation.
Since Bitcoin is the largest cryptocurrency with the largest market capitalisation, let’s take a look at some of the biggest bitcoin-kit investors that end up controlling most of the crypto market.
Bitcoin “whale” investors
It goes without saying that Satoshi Nakamoto, the unknown personality hiding behind the pseudonym of Bitcoin’s founder, is one of the largest “Whale” investors. An estimated 1 million Bitcoins out of the 21 million that will ever be delivered belong to Satoshi Nakamoto. Even though the person who owns these Bitcoins has not made transactions that could radically change the price of the cryptocurrency, it still plays a vital role in Bitcoin’s volatility and liquidity.
Grayscale Investments LLC owns around 656,000 Bitcoins and is the leading Bitcoin owner apart from Satoshi Nakamoto. As of April 2021, when the price of Bitcoin is circulating around $60,000;
656,000 BTC * $60,000 ≈ $39,360,000,000 Bitcoins
The next biggest Bitcoin holders are the Bulgarian government, the Winklevoss twins, Block.First, Microstrategy, etc.