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It is only natural that the price of BTC changes following whales’ transactions. Because altcoins have smaller market capitalizations, this effect is even more pronounced on their prices.
The ways whales manage to manipulate the market are inventive and can lead to heavy losses for small traders. In our guide, we look into the matter and reflect on how to protect a wallet against whales.
Understanding the Concept of Whales
The term “crypto whale” refers to a person or organization with a significant amount of a particular cryptocurrency. To be a “whale,” one must own thousands of BTC. However, it is fair to say that there is no “official” barrier to receiving this label.
Consider that altcoins have a lower market cap than BTC. Consequently, you will need to hold more tokens to consider yourself a whale on these markets.
Whales will eventually sell part of their assets and flood the market, forcing prices below their actual worth. They will then purchase back in enormous quantities, establishing an artificial scarcity.
A coin’s value may vary depending on how quickly a whale releases tokens into circulation.
A Classic Way to Manipulate the Market
A classic whale example brings us back to February 2021. The Kraken crypto exchange saw the ETH price collapse from $1,600 to $700 in just a minute. The exchange CEO later revealed that the sharp decline was due to a sudden ETH dump from a single wallet.
Something similar happened in 2022, with a major Bitcoin holder dumping $2.4 billion from his crypto reserves.
Sometimes, a large order by a whale to sell off a large portion of their cryptocurrency tokens creates panic. As a result of the operation’s turbulence, crypto prices fall.
Consequently, a domino effect occurs, and everyone soon sells their tokens at a discount. The system allows whales to acquire more coins for less money, which gives them more significant influence.
By placing large purchase orders, whales artificially boost the token’s value. People are more likely to increase their offers if they see a demand for coins.
Additional investors get concerned about missing out on a lucrative opportunity. When a token’s value rises, investors feel entitled to a portion of it.
This system allows whales to make a good profit by selling part of their tokens.
Can You Protect Your Funds Against Whales?
Although not a simple effort, protecting your crypto wallet against whales is theoretically conceivable. Make sure you know why you’re selling before you do so. Do not sell if you don’t understand why your coin’s value has decreased.
Large price swings are possible with a small-cap coin. Volatility happens when key players move large sums of money in and out of the thinly traded asset.
The decentralized and private nature of crypto makes it hard to find who is manipulating the market. If you are thinking about bringing a trader to court, remember that crypto’s pseudonymity is an obstacle.
Recognition of this form of fraudulent trading is the best approach to protect your savings. You may even profit from these operations if you understand how the system works.
Some crypto projects design anti-dumping mechanisms to protect smaller investors. These techniques can undoubtedly have a positive effect on the project.
Will We Ever Witness a Future without Whales?
If we look at traditional markets, the crypto world won’t probably get rid of whales in the future. However, the importance of large investors may decrease over time.
Whales account for a decreasing percentage of top cryptocurrency holders. This trend may lead to a significant transformation in the crypto market.
Smaller investors may not find themselves in full panic mode when large investors dump their coins. As a result, buyers are more willing to take advantage of outrageous discounts and begin acquiring coins at lower prices.
You may wish to use whale tracking tools while you wait. Etherscan, an explorer for the Ethereum blockchain, helps you locate the largest wallets on the market.
Twitter also has several accounts monitoring whales on the crypto market in real-time. If you wish to track whales, you may consider subscribing to more advanced tools.
To be a successful cryptocurrency trader, you must keep an eye on the movement of whales. In a nutshell, whales have a rippling effect on other token investors. In order to control the market, they can raise and lower the pricing.
The presence of whales is crucial. Always take whales into account while making buying and selling choices. Every great trader considers all the potential scenarios and designs a plan for them.