Bitcoin is a revolutionary cryptocurrency because it’s widely accessible to everyone, combating the limitations of real-world banking systems. People can own Bitcoin by buying it from crypto exchanges, so they only need an internet-connected smartphone to invest.
Bitcoin is decentralized, meaning no institution or government can influence prices. However, since there are no limits to how many Bitcoins someone can own, 90% of the cryptocurrency in circulation is owned by whales — individuals or entities holding large amounts of crypto coins.
This has been a massive concern for experts and investors as well because it shows a trend of BTC ownership concentration, which is a sign of market manipulation and a risk for decentralization.
Since whales own so many Bitcoins, their movements across wallets can trigger massive price swings, affecting the average Bitcoin prediction. But how long will this happen?
Why have whales so much power?
Becoming a whale means acquiring enough assets to have the power to influence the market. When these entities operate large trades or transfers, prices fluctuate due to the new inflow of investments and also because regular investors usually follow whales to mimic their strategies.
Satoshi Nakamoto, Bitcoin’s creator, is believed to be the biggest whale because he owns a considerable number of coins. While some critique his decisions, others are waiting for him to release his Bitcoins to the network, which will positively impact Bitcoin prices.
Types of whales
Of course, there should be a way to measure a whale’s development, as no one can simply become one. There are a few stages of becoming that influential, depending on how much crypto an individual or entity owns:
- A shrimp is a beginner in owning crypto, with less than one BTC in the portfolio;
- A crab starts diversification and owns up to ten BTC;
- An octopus is actively engaged in investments and can have about 50 BTC;
- Fish starts to influence smaller entities with investments varying from 50 to 100 BTC;
- A dolphin can impact less-known cryptocurrencies by holding up to 500 BTC;
- A shark has the power to trigger large-scale trading activities with portfolios of about 1,000 BTC;
- A whale has massive portfolios with even 5,000 BTC and is tracked by investors;
- A humpback is the final boss of cryptocurrency owning, having more than 5.000 BTC holdings;
Should investors worry that whales own so much Bitcoin?
Over one million wallet addresses hold almost all of the Bitcoins in circulation, which experts believe risks decentralization concepts. Ethereum staking experiences the same problem as pool staking, as only a few pools rule over the network prices.
Given how fast they’ve achieved so much, a small group of whales might acquire the entire BTC supply at some point in the future. If that happens, Bitcoin’s ecosystem will change completely, driving users to other cryptocurrencies and blockchains that truly prioritize decentralization. At the same time, Bitcoin’s reputation would be tarnished.
That’s because these whales would completely control Bitcoin, so there would be no point for smaller investors to get into BTC. However, they couldn’t change Bitcoin’s protocol, so the blockchain would operate as usual. A significant change would happen only if all miners, developers, and nodes concentrated their efforts on working with whales.
How to track whale movements
Since whales are having such a massive impact on the crypto market, many investors track them closely to follow their movements or get an idea of how the market will change. Sometimes, a massive asset movement from these whales can be a sign of a bearish or bullish trend.
The most commonly used technique is to view whales’ crypto wallets, which is doable since the content on blockchains is visible to every participant. You only need to know their addresses to track activities and see when they’re doing a significant asset movement.
Another valuable strategy is to analyze transaction volumes and patterns to anticipate certain movements or trends. For example, when whales buy a significant amount of cryptocurrency, prices boom, but when they sell, the crypto market value drops, causing the market to be highly volatile.
The link between whales and crypto prices
Whales are essential for the crypto market as they’re clear indicators of future prices and trends. Whales’ transfers can increase volatility, especially when they’re making a big purchase or selling. Therefore, they’re usually the cause of market uncertainty.
It can be possible for whales to time their activities and manipulate prices to their own advantage, which is why they’re controversial. Their influence on crypto liquidity is also considerable, notably in smaller cryptocurrencies, as they trigger imbalances in supply and demand following significant transactions.
Whales can also compete in trading, which can significantly disrupt the market’s stability. For example, whales have recently fought to acquire Solana-based tokens as meme coins’ value fell on the market, causing massive changes in the trading sector.
How can investors protect their assets from whale-related instability?
While many investors follow whales’ movements and adjust their strategies, others are affected by their lack of action. Regardless of trends and influences, investors must learn to protect their assets, and there are other ways to do so than monitoring the market.
For instance, an effective way to counteract turbulent market prices is to diversify your portfolio and spread investments across multiple industries to reduce the impact of price manipulation. At the same time, trading can become safer with stop-loss and staggered orders.
Finally, investors should aim for long-term objectives for their portfolio investments to reduce the effect of short-term fluctuations on their assets. This strategy involves rarely buying and selling, so you should mostly keep your cryptocurrencies for long enough to gain significant value.
What do you think about crypto whales?
Crypto whales are organizations or influential individuals who own a considerable amount of cryptocurrency. They’re known for causing major price swings after significant transactions, which is why investors love and hate them.
While investors can follow whales’ actions and adapt strategies on the go, whales trigger massive price movements and a short-term loss of liquidity.
Article and permission to publish here provided by Mary Hall. Originally written for Supply Chain Game Changer and published on December 23, 2024.
Cover image by Satheesh Sankaran from Pixabay.