What is a crypto whale?

A crypto whale refers to a person or entity that owns a large amount of cryptocurrency, enough so that their transactions alone can influence the currency’s market.

In general, someone who owns at least 10 percent of a given cryptocurrency can be considered a whale. Others consider whale status for any crypto wallet that holds more than $10 million in a single cryptocurrency, or even a minimum of 1,000 BTC. Whales are closely monitored, or “whale-watched” by other shareholders, as their share of funds can swing or manipulate currency valuations – and the crypto ocean is full of them.

Looking at Bitcoin, the top 110 wallets, identified as those holding more than 10,000 BTC, own 15.35 percent of the total shares. The top four accounts — those holding more than 100,000 BTC — own 3.42 percent as of May 2023, according to crypto data aggregator BitInfoCharts.

Why do crypto whales matter?

Crypto whales are the biggest players in decentralized finance, as just one of their transactions can single-handedly affect how a particular cryptocurrency is valued. Simply because of their sizeable wallets, any move they make – whether buying, selling or trading coins – automatically changes the currency’s supply and demand, and the resulting selling price.

Whales tend to trade in millions of dollars, often leading directly to price swings and market turns. When whales buy into a crypto asset, it signals a growing demand for that particular coin to the crypto community, which tends to follow suit. When a whale sells or “dumps” a large portion of its holdings, price volatility follows in its wake.

“Crypto markets are generally quite thin, which means that sales or purchases of larger amounts can move prices significantly higher or lower,” said Lars Seier Christensen, chairman of privacy-first blockchain Concordium and founder of online trading platform Saxo Bank. “Therefore, the trading actions of such whales are followed with interest to try to predict price movements.”

CRYPTO WHALES CAN SAY A MARKET REVIVAL

Crypto whales sway the market in a similar way to a large owner of shares in a company, said Winston Robson, co-founder and CEO of metaverse marketplace WeMeta.

Take Elon Musk and his tweets for example. After the SpaceX founder added “#bitcoin” to his Twitter bio, Bitcoin’s valuation rose 14 percent in January 2021. It was the first time the total market value of all cryptocurrencies breached $1 trillion, Reuters reports.

“Whales hold a significant portion of a given cryptocurrency’s total supply, so often they are very enthusiastic and loyal to their preferred crypto of choice,” Christensen added. “Whales could be a supportive factor if they maintain their large positions instead of selling.”

CRYPTO WHALES CAN SAY A MARKET GIVEAWAY

Centralized cryptocurrency exchange FTX’s downfall can serve as an excellent example. Although rumors claimed that Sam Bankman-Fried’s project might be insolvent, it wasn’t until Binance, a rival cryptocurrency exchange and well-known crypto-whale of the asset, announced its plans to exit that led to FTX’s collapse not.

Binance liquidated its holdings — estimated at 5 percent of the total offering, or $580 million at the time — on Nov. 6, 2022. Five days later, FTX filed for Chapter 11 bankruptcy protection as Bankman-Fried stepped down as CEO.

Crypto whales can affect decentralization

On the other hand, whales can be a threat to a central pillar of crypto – decentralization.

“Most blockchains are controlled by their token holders, and influence on the decisions is mostly correlated with the size of one’s stake,” Christensen said. “The more concentrations of major interests, the less decentralized the decision-making to support a project can be.”

This influence extends to a project’s overall direction, as deliberated among the communities that govern them: decentralized autonomous organizations, or DAOs.

“Crypto whales matter because they have a substantial and authoritative voice when it comes to DAO voting or community direction,” Robson said. “Some DAO votes were 80 percent against and 20 percent for, but when a whale cast their vote, it dropped to 96 percent for and 4 percent against.”

Crypto whales can affect liquidity

In terms of liquidity, if a whale sits on a large amount without any movement, it can hurt a cryptocurrency, as the total supply of most tokens is capped at a certain amount. With the concentration of coins locked in one wallet, smaller traders and investors are limited to the remaining circulating tokens.

In an effort to keep their transaction activity off the radar, whales who want to sell their assets may do so in smaller groups over a long period of time to avoid sharp market distortions. Alternatively, they may also resort to a tactic outside regular exchanges known as over-the-counter trading. It enables whales to buy and sell crypto to each other using a transaction method that processes private transactions from a blockchain’s mainnet.

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Crypto Whale Examples

Although legal names may not be attached, crypto whales can be traced back to their wallet address’s public key. A public key, which lends itself to blockchain’s component of transparency, is a string of alphanumeric characters that exposes account activity but does not reveal any identifiable user information.

This dynamic creates a kind of pseudonymity, where crypto holders can be recognized without their true identity being known. Still, members of the crypto community have theories about who’s who in the whale pod.

The following list, which comes from CryptoSlate and the Bankless Times, compiles the top wallets linked to individuals, excluding well-known private or public companies as well as governments.

Satoshi Nakamoto: Inventor of Bitcoin, Nakamoto holds one million BTC, or more than $26 billion as of May 2023. To this day, no one can confirm whether this alias, drawn from Bitcoin’s white paper, belongs to just one person or a group of people .Brian Armstrong: The CEO of Coinbase, one of the largest crypto exchanges on the market, disclosed in a November 2022 tweet that his company was in possession of 2 million BTC, totaling $53 billion as of May 2023.Michael Saylor : The executive chairman and a co-founder of MicroStrategy reported his crypto positions at 17,732 BTC in an October 2020 tweet – amounting to $476 million as of May 2023. Chris Larsen: Co-founder of several Silicon Valley tech startups, it is estimated that Larsen’s 17 percent stake in Ripple translates to at least 5.19 billion XRP. As of May 2023 rates, this would come out to $2.4 billion.Changpeng Zhao: The CEO of Binance is a well-known crypto whale who holds 95 percent of his wealth as Binance coin and Bitcoin. Zhao’s net worth, estimated at $65 billion in March 2022, dropped to $4.5 billion in December 2022 due to a crypto crash. following a historic Bitcoin seizure case. Draper is also known to have investments in other crypto assets, such as Aragon’s ANT tokens.

What is Crypto Whale Tracking?

“Crypto whale tracking is when people watch the activities of large holders of a particular crypto to try to predict price movements or understand market sentiment,” said Daniele Servadei, CEO and co-founder of Sellix, a crypto-compatible e-commerce payment processor .

These accounts are closely monitored by the crypto community at large due to their strong swing on the market. In fact, online trackers like Whale Alert broadcast trades from top accounts in real time directly on its website and via its associated Twitter account.

“The goal is general interest for some…but certainly also with a hope to predict short-term price movements of the tokens in question.”

“Investors can whale watch to inform their own strategies or to better understand the market,” Servadei said. Whale trends to watch for include buying, selling or a move in assets from their original wallet or exchange.

Christensen described a mirror effect that smaller holders, nicknamed crypto minnows, can mimic as part of their trading practices to gain profit or avoid potential loss.

“Because of the transparency of the blockchains, it matters when a large holder is active in the market,” he said. “It can be tracked quite easily, and so investors track both actual transactions as well as movements in and out of exchanges, which can indicate an upcoming trading intention of a whale.”

“The goal is general interest for some,” he added, “but certainly also with the hope of predicting short-term price movements of the tokens in question.”