What Is a Crypto Whale?
A crypto whale is someone who holds a very significant stake in a particular cryptocurrency. The size of an individual’s holdings determines the effect of their actions on the general crypto market.
Imagine, for example, that a single person owns 20% of the tokens in a particular currency. If that person were to sell off a large portion of their holdings, the price of the token would take a noticeable dip. This influence on the market is what makes crypto whales such an important factor in the general operation of crypto markets.
Experts often disagree on the threshold for being considered a crypto whale. When it comes to Bitcoin, people often say that a person must hold at least 1,000 BTC to be considered a whale. This is a considerable number of tokens, especially considering Bitcoin’s relatively high valuation. In this case, setting a high threshold for becoming a crypto whale makes sense because of Bitcoin’s prevalence and the high number of tokens in existence. In such a substantial market, considerable holdings are necessary to single-handedly influence valuations.
In smaller crypto markets, holding 10% of all available tokens is often necessary to be considered a crypto whale. These holdings are large enough for the holder to have a serious impact on the currency’s valuation. In a volatile market, assessing the behavior of a crypto whale can be one of the best ways to predict a token’s future price.
Some people apply the term “crypto whale” exclusively to wealthy individuals with enormous crypto holdings. Others are completely comfortable applying the term to crypto-holding institutions. Investment firms like Fortress Investment Group and Pantera Capital can have considerable effects on currency valuations — and that’s why they’re called crypto whales.
Origins of the term ‘Crypto Whale’
The term “crypto whale” has developed organically within the crypto community. 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.
Crypto whales, meanwhile, are the gargantuan creatures who can’t help attracting the attention of everyone else in the sea. They’re the most influential market actors, and their behavior affects everyone else even when they have the best of intentions. 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. Crypto whale is one of the more common terms, a useful phrase for understanding the marketplace’s most influential investors.
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 2022, four crypto whales held 3.49% of all the world’s Bitcoin. The 100 largest wallets, meanwhile, held 15.35% of the Bitcoin in circulation. Whenever a few groups or individuals hold so much of a particular asset, you can assume they’ll have an extraordinary impact.
Investors recognize the ripple effect of crypto whales on the marketplace. That’s why a whale’s transactions always make the news. By monitoring what the largest holders are up to, you can prepare yourself for sudden fluctuations in the market. There are websites, such as Whale Alert, which are dedicated to “whale watching”.
Crypto whales can affect nearly every aspect of a cryptocurrency market, but they’re especially influential in the areas of liquidity and price. Whenever a crypto whale engages in serious activity, you can expect an impact on these metrics.
Liquidity refers to the amount of a given cryptocurrency that’s available for use. While crypto whales inject wealth into a protocol, they often decrease liquidity because their funds remain stagnant. Instead of passing from one trader to another, a crypto whale’s holdings simply sit in a gigantic heap. When coins are stashed away in a crypto whale’s accounts, there’s less currency out there for other investors to trade with.
Crypto whales have a tremendous effect on the price of cryptocurrencies because their transactions tend to account for such a large proportion of the total currency in circulation. If a whale sells their crypto for fiat, the price of the currency is almost certain to drop. If multiple crypto whales begin dumping their holdings, investors are likely to go on high alert. The greater the number of big investors selling their holdings, the lower the coin’s price is likely to drop.