Cryptomarkets are diversifying at a huge pace across the globe after the prices hiked up to $20,000 in 2017 in some of the crypto exchanges. Investors are considering the cryptocurrencies as the opportunity to double their money in no time. The price of Bitcoin is affected by several factors like demand-supply, historical trends, announcements, crypto whales and many more. In this article, we are going to discuss one of the major factor reflecting the price of cryptocurrency, i.e. Bitcoin whale. Whales in cryptomarket are the big fishes having a strong impact on the market. They are the people with a massive amount of money which have the potential to alter the markets. Thus, it is important to know about them before making any strategy of investment.
Who Is Bitcoin Whale?
In the context of money, Bitcoin and crypto space are ruled by the top 500 hundred holders of the cryptocurrency called “whales”. Bitcoin whale can be institutional investors, significant entities of traditional markets, maverick funds who ventured into startups or the big industrialists turn investors. As they hold a massive amount of or a significant portion of the circulating crypto coins, their moves can cause the tidal waves in the crypto markets resulting in the change in prices of highly volatile cryptocurrency. Considering the already volatile situations and manipulations of price by other factors, Whales’ disproportionate power adds the problem in the crypto market place for the beginners who knows less about their impact.
By the analogy, if the crypto market is a stormy ocean and small fishes move with the current to survive and earn the profits in the crypto industry then there are big fishes like that of whales who can influence the current while getting hold of the storm of volatility in bear markets. When the whales act combining together then they can even deflect current in the direction for themselves. Whales always wish to maximize their profits from larger trades by convincing the small investors, assessing the mood of retailers and analysing the willingness of participants of crypto market players to follow the particular direction of the current.
How Do Bitcoin Whales Influence The Crypto Markets?
Indirectly or directly, Bitcoin whale (s) decide the rise and fall of the prices of cryptocurrency in the market by purchasing and selling the huge amount of crypto coins. Once they found the opportunity, they use different tactics to influence the markets.
Panic Sales Trigger/ Rinse and Repeat
Sometimes it is being noticed in the crypto markets that price of Bitcoin drops violently without any major announcement or recent development, but some of you might get an idea that sudden fall is the result of the superpower of Whales. The situation of sudden drop generally results in further sell-off (even the traditional HODLers sell some portion of BTC amid the dramatic fall). Whales try to play with the psychology of the small investors who tend to sale more of their assets under the panic of crashing cryptomarket. But after the price lowers down as per their strategy, they tend to purchase the coins at a highly lower price to profit from the recovery. This tactic is known as “rinse and repeat” in which whales tend to force down the prices with the motive to trigger panic selling. Thus, when you notice the sudden price drop of around “10%”, then try not to sell your assets in anticipation but wait for some time to see the market recovering.
Utilizing Buy and Sell Walls
Absence of large banks and relatively clueless participants than traditional markets, whales find the crypto markets as the paradise for speculation and earning the huge profits. Sometimes, whales do not have to either sell or buy their cryptocurrencies to manipulate the markets, they can bluff with buy and sell walls. Crypto exchanges maintain the order books to aid the traders by setting up the order to purchase or sell at a particular price (not that of spot price). Suppose, when the market drops, traders tend to buy at the lower bid and sell when the price touches the higher level. But to place the order, one needs to have sufficient funds to cover the orders. Thus, whales in several ways can deceive the traders by creating illusionary selling or buying wall.
OTC Markets and Dark Pools
Most of the crypto whales are the early birds of the crypto markets with a huge amount of capital and influence in crypto markets. Whales generally operate together to coordinate their actions even when they operate from the over the counter trading platforms or dark pools. Institutional investors sometimes purchase huge amounts of Bitcoins from dark pools to avid being noticed in traditional exchanges and plan to execute a more thoughtful strategy. Generally, OTC and dark pools indirectly push the whales to influence the Bitcoin markets.
The dominance of whales is not new to the crypto market place, neither called as well know to the small investors and beginners in the crypto space. Mainly, whales are those few people who trusted the potential of Bitcoins at an earlier stage and grab as much cryptocurrency as they could with a handful of dollars. Becoming a whale with the present price of Bitcoin might be expensive but you can save yourself from the influence of whales easily by understanding the trends in the crypto marketplace.
To turn the marketplace into a non-manipulative place by whales, the crypto community needs to be expanded who can at least own few of the coins. As the community of small investors grow, the influence of the whales can be diluted gradually. Undoubtedly, it is difficult to take Bitcoin away from whales but buying and selling not according to them might drag away the crypto markets from whales. Our small investments can bring evolution into crypto space and can create the level field for the investors wish to enter into crypto space and want to earn from the money they can afford to lose without worrying about the Bitcoin whale prevalent in the market.