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Market whale is a term used to describe a market participant who holds a significant amount of assets, controlling much of the market share and significantly influencing the price dynamics.
There’s a common understanding that whales are bad for the market, and they can manipulate the marketplace for their benefit. However, whales in cryptocurrency can be beneficial.
A crypto whale can drive liquidity and market demand in several ways, and in this article, we will discover how these big players affect the market and how they can be beneficial.
Crypto whales are individuals or firms that own large market shares and hold the most assets.
Market whales can considerably influence the market by trading decisions, causing bearish or bullish sentiments.
Whales in the crypto market can be dangerous if they have the wrong motive. However, retail traders follow the big players' move to attempt a successful trade.
Understanding Crypto Whales
Crypto whales are investors and participants who hold a significant number of digital currencies and tokens enough to control the market.
Whales usually own more market share than other participants or hold more high-value cryptos, leading to significant holdings in the market.
Bitcoin whales are investors or entities with over 1,000 bitcoins in their wallets. Currently, there are around 2,000 wallets that hold more than 1,000 BTC, and they own around 40% of bitcoins in circulation.
Whales also prevail in altcoins like Dogecoin but are distributed differently. One Dogecoin wallet owns 23% of the market, while the top 14 Dogecoin wallets own more than 49% of the whole market, comprising over 1.1 million wallets.
Different sources highly monitor whales, and their activities can move the market in different directions. Therefore, many track crypto whales’ activity and copy it to follow the trend.
Are Crypto Whales Beneficial For The Market?
Despite these big players’ central influence, they play a significant role in stabilising the market and increasing its liquidity, besides many other benefits that will be discussed below.
Drive Bull/Bear Runs
Retail investors tend to follow the crypto whales’s steps and decide on buying or selling coins according to the whales’ activities. When a big player decides to buy coins or a big amount of a particular cryptocurrency, every other trader tends to follow and trigger mass buy orders.
These activities put the market in bullish sentiment and create bull runs when everyone in the market follows the whale’s movement.
Similarly, whales can trigger a bearish sentiment if they sell their cryptos. Since they own large amounts of assets, selling them can flood the market with that crypto and drop the prices, causing a bearish sentiment.
Whales are top crypto liquidity providers because they own a significant amount of the coin(s) in question, and their trading activity highly impacts the market liquidity. For example, if whales decide to hold on to their cryptos, the underlying coin’s liquidity in the market will decrease.
On the other hand, if whales engage in buying and selling activity, the market liquidity becomes more dynamic.
The fact that big players like bitcoin whales hold many coins can affect market stability. When whales slow down on their trading activities, they cause the market volatility to decrease and prices to stabilise.
Eventually, other traders in the market will follow this example, slow down on their buying and selling, and stabilise the market.
A whale can influence volatility, liquidity, and market prices. Thus, when a BTC whale sells many coins, it increases the liquidity of that asset in the market, increasing its supply and rescuing the prices.
What Is Crypto Whale Watching?
Crypto whale tracking enables traders and market participants to follow the trend and save time on analysis by taking the steps of big movers.
Some sources on the internet or whale-watching accounts on social media follow known whale addresses and send a whale alert to the crypto community when a big player moves or a new whale shows up.
However, if you are doing it alone and want to know how to see what crypto whales are buying, here is how you can whale watch.
Transactions from wallet to exchange: When a crypto whale transfers huge amounts of cryptos from their wallets to exchanges, it means they are selling these coins and may trigger a bearish run.
Transactions from exchange to wallet: When a crypto whale transfers many cryptos from exchanges to their wallets, they buy several coins, which may trigger a bullish run.
Transactions between wallets: Some whales buy and sell coins indirectly and between different wallets to conceal their identity, but lucky trackers can watch this activity and copy this move.
How Do Crypto Whales Affect The Market?
Since many traders observe crypto whales, these players’ activities can influence other market participants and control the market sentiment, leading to short-term and long-term effects.
In The Short Term
Market whales focus on making more money and growing their wealth by engaging in market activity. Their buying and selling patterns help them grow their holdings and cause price movements in two ways.
Buying more assets in the market and triggering a bullish sentiment where traders and other market participants start mass buying movement. This activity drives the price higher; later on, whales can sell at higher prices and reap the profits.
Selling more assets to increase the market supply causes a bearish sentiment, pushing other traders to sell the same asset to the market. Therefore, dragging the demand and prices lower, then buying the same asset at a lower price, enables them to buy more assets than they originally had in their wallets.
In The Long Term
In the cryptocurrency world and decentralised governance, crypto projects distribute tokens that hold voting and decision-making power. Wealthy crypto holders can buy a higher number of these tokens, garnering stronger voting power and participating in decisions that benefit them.
Are Crypto Whales Dangerous?
Crypto whales are two-sided swords. They can benefit the market and damage it at the same time, depending on the motive behind the whale’s activity.
Crypto traders follow the steps of market whales, enabling them to make similar decisions and earn if big players succeed in the market. However, big crypto holders are considered a risk if they perform any malicious activity or pump-and-dump schemes, leading to a market crash.
Big movers can help stabilise the market in times of adversity by supplying it with liquidity and assets, enabling other market participants to trade and make money.
Crypto whales are key players who hold the largest shares in the market and whose decisions affect the market enough to steer it away. These big players can trigger bullish or bearish sentiments for their benefit, which other traders may follow to benefit as well.
However, not every crypto whale is dangerous because they are huge crypto liquidity providers and supply the market with assets and liquidity that stabilise prices, causing the market to work smoothly and efficiently.