If you have stayed around the cryptocurrency market long enough, then you will be familiar with the term “crypto whale”. This term usually refers to big players in the crypto space that are known to hodl and move around large amounts of any given coin, often affecting the price while they’re at it. We’ll discuss how whales are affecting the cryptocurrency market by considering the following:
Who is a Whale
In the cryptocurrency market place, the term whale is used to describe any individual or group that controls a large amount of Bitcoin or cryptocurrencies. Just like the size of the whale distinguishes it in the ocean, portfolio size of these individuals or groups sets them apart in the crypto industry.
It is estimated that roughly 40% of all the Bitcoins in existence are held by only about 1,000 people. That is some huge volume to deal with, no matter the ratio among them. Some of these whales are well known individuals and groups. Roger Ver, the Winklevoss Twins and Charlie Shrem are some of the well known individuals that control large volumes of Bitcoin. While Fortress Investment Group and Pantera Bitcoin Fund are examples of group whales.
The majority of today's whales consist of early adopters who allocated substantial funds to acquire Bitcoin and cryptocurrencies during periods of lower prices. The Winklevoss twins, for instance, directed $11 million into this venture, a fraction of their payout from a Facebook intellectual theft lawsuit involving Mark Zuckerberg. This endeavor granted them ownership of 100,000 Bitcoins, which are now valued at over $1.1 billion.
Do Whales Manipulate the Market?
Most whales are hodlers, therefore are expected to retain their holdings over an extended period of time, especially as Bitcoin seems to retain so much upside potential. However, from time to time, since the blockchain network is open and everyone can view the transactions that go on, we see huge volumes being traded. Apart from that, whether in the buying or selling direction, the trades of these whales always have an impact on the market.
Smaller traders most often seek to ride the trend on which whales are trading. Therefore, when these trades happen, the market seems to follow the whales. This is one major way how whales are affecting the cryptocurrency market. They determine the direction.
This kind of behaviour has caused some suspicion within the industry with people accusing the whales of manipulating the market. Although this behaviour is frowned upon, it isn’t technically breaking any laws. A typical scenario illustrating this is when whales initiate a massive sell-off of Bitcoin or any other crypto. Smaller traders will follow suit after the price has dropped. Afterwards, the whales buy back their crypto at a much cheaper rate, making a lot of money in the process.
However, it is also fair to realise that most of these whales are long term investors who are astute hodlers of Bitcoin and cryptocurrencies. Therefore, we cannot always accuse them of manipulating the market, even though they have the capacity to do so.
How Can You Trade Like a Whale?
What we should be concerned about is if there will come a time that these whales will want to recover their capital. Would there be a massive sell-off of Bitcoin and cryptos, and how will it impact the market? Well, the Bitcoin and cryptocurrency market is still young, and we expect the system to last for a very long time before any such thing can be anticipated.
Whether there are whales in the market is not a question. Also, whether their actions have any impact on the market has also been established. What traders like to know is the heartbeat of these major stakeholders in the industry. This could serve as a fundamental factor in determining what to expect from the markets. Real time prices and market capitalization with respect to volume are areas where we can determine which way the whales are moving.
Emulating the trading strategies of prominent crypto whales involves understanding some of their key practices. These influential traders often possess significant resources, enabling them to execute substantial trades. To gain insights from their approach, consider the following principles:
- Informed Decision-making: Stay well-informed about the cryptocurrency ecosystem by keeping up with reputable news sources and reliable platforms. Understanding market trends, new projects, and potential events can contribute to better decision-making.
- Analytical Approach: Utilize a blend of technical and fundamental analysis. Technical analysis involves studying historical price data and chart patterns, while fundamental analysis focuses on evaluating the intrinsic value and growth potential of a cryptocurrency.
- Risk Management: Prioritize risk management to safeguard your capital. While crypto whales can tolerate losses, individual traders should be cautious. Implement risk management techniques like setting stop-loss orders and diversifying your portfolio.
- Adaptability: Remain adaptable to changing market conditions. What works in a bullish market might not be effective during a bearish phase. Being open to adjusting your strategies can be beneficial.
- Patience and Discipline: Practice patience and discipline in your trading approach. Crypto whales often wait for favorable opportunities, and exercising restraint can prevent impulsive decisions.
- Network and Insights: While crypto whales might have access to insider information, you can still benefit from networking within the crypto community. Engage with knowledgeable traders and participate in discussions to gain insights.
- Learning from Mistakes: Mistakes are inevitable, even for crypto whales. Use your experiences as learning opportunities, and continuously improve your trading strategies.
Remember, while understanding the strategies of crypto whales can offer valuable insights, individual trading outcomes vary. The crypto market carries inherent risks, and any trading decisions should be based on careful consideration and personal risk tolerance.
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