The cryptocurrency market is known for being volatile and difficult to navigate, but some things are universal. Instead of trying to analyze every little detail, many traders heed the old motto of “follow the money”. In the blockchain ecosystem, this translates to tracking the movements of crypto whales – mega wallets with the power to influence the market.
In this article, we’ll deep dive into the concepts of crypto whales, why they matter, and how you can track them yourself.
A crypto whale is a wallet that holds a massive amount of cryptocurrency, typically enough to influence the market. The holder might be an individual, institution, or entity.
There is no strict definition of how much one needs to own to be considered a whale but let’s use an example for context: wallets holding 1,000 or more BTC are generally classified as Bitcoin Whale wallets. Similarly, owning a significant amount of Ethereum or other cryptocurrencies can earn a person or institution the whale title.
Whales wield substantial power in the crypto market because their trading activity can impact the market as a whole. For instance, if a whale sells a large portion of their Bitcoin, it can create a ripple effect throughout the market. This can lead to a significant drop in the asset’s price. The reverse is also true as buying a large amount of cryptocurrency can cause prices to surge. In that case, smaller investors follow the whale’s lead.
Crypto whales matter because their actions can affect the entire crypto ecosystem. Their decisions, whether to buy, sell, or hold, can impact market pricing, liquidity, and even decentralization.
Crypto whales can signal market movements simply by moving their holdings. Blockchain wallets are transparent and easy to track. When a whale transfers a large amount of crypto between wallets or exchanges, it can signal an impending transaction.
Traders and investors can closely monitor these movements as they often precede a significant buy or sell event. This signal can lead to a cascade of market reactions, from sudden price surges to panicked sell-offs.
For example, when a whale transfers a large amount of Bitcoin to an exchange, it could indicate plans to sell, prompting other investors to sell their holdings in anticipation of a price drop. Conversely, large transfers from exchanges to private wallets may signal that the whale intends to hold for the long term, which can create a bullish sentiment in the market.
One of the main tenets of blockchain technology is decentralization. It’s the idea that no single entity should have too much control over the network. The presence of crypto whales undermines this principle as large amounts of wealth are concentrated in just a few wallets. Whales can influence the market, making it less decentralized.
For instance, in Bitcoin, approximately 2% of wallets hold over 90% of the total supply. This centralization of wealth means that a small group of whales can sway market trends.
Crypto whales can significantly impact liquidity, which refers to how easily an asset can be bought or sold in the market without affecting its price. When a whale makes a large trade, it can absorb or flood the market with liquidity, depending on whether they are buying or selling.
This can create price instability, especially in smaller, less liquid markets where a single trade can lead to substantial price changes.
For example, if a whale sells a massive quantity of a relatively low-volume token, it could lead to a sharp drop in price, leaving smaller traders at a disadvantage. On the other hand, if a whale buys a large number of tokens, it can scarcity which pushes the price upward.
Throughout the years, crypto whales have made headlines for their ability to influence the market. Here are two notable examples:
In late 2017, Bitcoin’s price skyrocketed to nearly $20,000, driven in part by the actions of crypto whales. During this time, a few large Bitcoin holders made significant purchases, which spurred smaller investors to jump into the market, causing prices to rise dramatically. While many factors contributed to this rally, the movements of crypto whales played a huge role in Bitcoin’s climb.
Earlier this year, an ancient Ethereum whale moved 15,000 ETH to the Kraken exchange. The whale in question had received 200,000 ETH in the Ethereum Genesis block and another 67,000 ETH from the Ethereum Foundation in 2015. Chances are, the whale took part in the Ethereum ICO back in 2015. The move of 15,000 ETH to a centralized exchange was a clear signal for some traders.
Subsequently, the price of Ether began a steady decline, decreasing from around $3,800 per ETH to the current price of $2,350. While the whale transfer probably wasn’t the sole reason for ETH’s downtrend, it was an indicator of a shift in the market, and accelerated a further sell-off by observers. Not all whales know where the market is going, but this one certainly had the right idea.
Some of the largest crypto whale wallets belong to early adopters, institutional investors, or cryptocurrency exchanges holding assets on behalf of their customers. Some of the biggest whales include:
Tracking crypto whales has become an essential practice for any traders looking to anticipate market movements. Luckily, blockchain offers a unique level of transparency: while you’ll never really know who owns a wallet, you can find large wallets and track their transactions. All of this can be done using on-chain data recorded by the blockchain.
There are various tools and platforms that allow investors to monitor whale activity by tracking coin distribution and transactions. A couple of popular whale-tracking tools are:
Now you know why crypto whales are important, you’ve added a new weapon to your crypto trading arsenal. With the right tools for identifying and tracking whale transactions, you can get valuable insights and make more informed decisions.