If you compare the cryptocurrency market with the ocean, then ordinary traders will be small fish in it, pumping groups will be sharks and the largest asset holders will be whales. Many people think that whales fully control the market and may collapse it at any time. However, is this really the case and can ordinary investors benefit from the actions of whales? We will describe in this article!
The main feature of a whale is the presence of a large number of cryptocurrencies. Its main goal is to manage the rate of this cryptocurrency for its own benefit, and for this it is necessary that the coin be in demand and very popular.
Thousands of small fish (read ordinary investors) pour their money into the common ocean and the whales can make money on it. That is why the main habitat of cryptocurrency whales has become the Bitcoin market. It has several types of whales.
According to recently published data, 109 people hold in their hands about 80% of all mined bitcoins. These are the whales who have real leverage on the BTC market rate.
There are other cryptocurrencies, large sums of which are concentrated in the hands of a narrow circle of people. For example, 40% of all existing ETH coins fall on the top 100 of the ethereum cryptographs. The Qtum, Gnosis and Storj cryptocurrency the figure reaches 90%.
Although skeptics claim that there are no whales and a small group of people can not control the cost of a cryptocurrency, the fact remains. There are people who own colossal cryptocurrency assets. It allows them to control the market.
The whale is massively selling assets at a price below the market, ordinary investors are frightened by the collapse of cryptocurrency and themselves begin to drain. The course falls even lower and the whale buys coins at a sharply fallen price. Because of the mass purchases, the price rises again and the whale repeats its cycle.
Suppose it throws on the market 6000 BTC. Noticing this, ordinary traders will decide that Bitcoin goes into a negative trend or collapses altogether. They will begin to get rid of their assets. If the sink becomes massive (that’s whales are trying to achieve), the price of BTC can drop to $ 5,000 or even lower. Then the whale will regain those 6,000 bitcoins that are sold and will purchase additional coins at a reduced price.
Now we will count. The whale sold its 6000 BTC for $ 34 million. If the exchange rate falls to $ 5,000, it can already buy 7,000 BTC with this money. That is, its dirty profit will be 5 million dollars. This is just one rinse. The whale is interested in “rinsing” as many bitcoins as possible out of ordinary traders.
The main goal is to create the appearance of a collapse or growth of cryptocurrency. To do this, the whale does not even have to throw its own assets onto the market – it is enough to place very large orders and cancel them before they are executed. At the same time, orders for buying and selling cryptocurrency are triggered.
The whale places a large order for the purchase of cryptocurrency (for example, BTC), thereby raising the purchase wall, in the first case. Other traders see this and, waiting for a jump in the course, start buying Bitcoin in large quantities. The whale waits until the price reaches a peak, cancels the order and sells part of its assets at an inflated cost.
It creates a large order to sell Bitcoin at a price lower than the market price, in the second case. Panic begins and ordinary investors massively merge their assets. The whale waits for the maximum price drop, cancels its order and buys bitcoin.
For example, if a whale puts up for sale 10,000 BTC at a low price and the rest of the traders have enough money to buy them back, it will simply lose its assets. If the traders are not able to redeem the entire amount, the other players will have to either wait for the order to be executed or lower the selling price themselves. This is what plays into the hands of a whale.
Many experts believe that the largest players in the cryptocurrency market are trading assets in the over-the-counter market. This is a kind of black market, where whales can non-publicly buy a huge amount of cryptocurrency.
Especially popular among whales are brokers, who offer their customers prices below the exchange and work only with the largest players.
For example, well-known over-the-counter brokers Circle and Cumberland introduced a restriction on the admission of new participants to 100 thousand dollars – to enter the circle of the elect and 250 thousand dollars – to trade in cryptocurrency.
Working through such brokers, whales can buy cryptocurrency from each other and even coordinate their actions. Having bought up a large number of coins, they go to ordinary exchanges and move the cryptocurrency rate in the direction they want.
Pumpers artificially increase the rate of altcoins suitable for Pump & Dump (we already wrote about them in more detail). They create hype in the cryptocurrency community, manipulate information guides, collect dumping groups to buy coins, and so on.
Whales also swing the course of cryptocurrency, of which they are holders. Often, they also act together and the main goal of whales is Bitcoin. Little-known Altcoins do not interest them.
Many investors, after reading about the whales, think that the last one only negatively affect the market and simply take profits from small players. Moreover, conspiracy theories have long been discussed in the cryptocurrency community, from which it follows that the whales want to either derail the entire market or completely take it into their own hands.
For example, such whales stock up bitcoin to control the market after the end of the mining era. It is estimated that in 5-6 years all BTC will be mined and developers will have to transfer the network to PoS mining. This means that the largest coin holders will manage the market. That is, whales.
Many believe that the winter crash of Bitcoin was caused by whales. They are already preparing for PoS mining and drowning cryptocurrency to purchase as many coins as possible.
However, due to the collapse, a huge number of users left the Bitcoin community and many potential investors simply did not enter it, waiting for the next fall. Bitcoin moved to a downtrend and it hit not only ordinary traders.
It is beneficial for the whales that the cryptocurrency is claimed and has the largest community possible. When it falls in value, their assets also become cheaper. That is, in the long run, it is simply unprofitable to roll the cryptocurrency down.
According to experts, the presence of whales is not a negative phenomenon. This is normal for any market. Large asset holders always set the development vector and come together to direct the market.
To some extent, whales have even a positive impact on the market. As long as they are interested in the cryptocurrency they are holding, they are also interested in the fact that it does not collapse.
Moreover, many whales (the same Nakamoto) do not even use their assets in order to lower or increase the rate of cryptocurrency. They simply keep the coins in their wallets, keeping the balance in the market.
However, even those whales who play with the walls of sales and “rinse” bitcoin, can be useful for an ordinary investor. The main thing is to catch the wave created by them in time.
For example, when a whale plays down and places huge orders for the sale of cryptocurrencies at a price lower than the market price, the exchange rate naturally drops. Most traders begin to merge assets, but it is much smarter to start purchasing them, as the whale itself does.
However, inexperienced investors should not use whale trends. After all, for this you need to be able to identify inflated sales and purchase walls, analyze the general situation on the market and correctly assess the situation on the stock exchanges.