Whales serve an important part of the natural world’s ecosystem. However, in the cryptocurrency world, they play a unique role that has the potential to have far-reaching effects.
The dominance of whales on the cryptocurrency market suggests that this supposedly democratizing movement is hampered by the same issues it was designed to solve. The main ideas of cryptography are anonymity and decentralization. Whales are supposed to assist ordinary people in achieving economic freedom. However, these principles appear to mirror and intensify the centralization and inequality issues that haunt traditional financial systems.
In this article, we will explain what Whales are and what their purpose is in the cryptocurrency world.
What is a Whale?
A Whale is a group of people pooling their resources to control a large percentage of a cryptocurrency. Hedge funds and Bitcoin investment Funds are examples of this type of investment. They can use this advantage to manipulate the price of a currency to their desired level.
You must be aware of what whales are doing in order to benefit from their movements. On the other hand, a whale can easily ‘smash’ you, so you should be careful. Whales often hold more than 10% of cryptocurrency’s total supply. As mentioned above, the largest hedge funds and investment funds, which control a considerable portion of the overall coin volume, can be compared to a whale. Thus, it is easier for a whale to dominate a currency that has a smaller capacity.
How Do Crypto Whales Work?
Whales manipulate cryptocurrency in two ways:
The ‘Sell Wall’ effect
A whale may occasionally place a large order to sell a large portion of its crypto tokens. They keep the price lower than other sell orders. This increases volatility, resulting in an overall decrease in the value of cryptocurrencies. This way, a chain reaction is caused in which individuals panic and begin selling their tokens at a lower price. As a result, whales can purchase more coins at a reduced price, giving them more power.
The ‘Fear of Missing Out’ (FOMO) effect
In contrast to the ‘Sell Wall’ effect, whales often artificially inflate token prices by placing large buy orders. They generate interest in cryptocurrency tokens, encouraging users to increase their bids. They also attract the attention of other investors who fear missing out on a profitable deal. Investors believe that because the token’s demand has increased, they should be able to get a portion of it as well. Whales will be able to sell some of their tokens for a profit.
Generally, whales cause a ripple effect that impacts other token investors. They can influence the market to their advantage by increasing and decreasing prices.
How To Track a Whale?
Whale tracking can be done by using two of the following methods:
Blockchain Explorer
Blockchain explorers work similarly to cryptocurrency search engines. They collect data from the blockchain through transactions and blocks and organize it into categories that can be searched.
You can see the transaction history of every wallet address and the facts about each mined block. With a blockchain explorer, you can view the day’s largest transaction, allowing you to detect whale moves and track affected wallets quickly.
Whale Alert
With over 1.2 million followers, this is one of the largest Twitter crypto communities. In real-time, a whale alert keeps track of large and unexpected transactions to and from wallets/exchanges.
Takeaways:
- Whales are a group of people that tend to control the price of a big cryptocurrency.
- Whales can manipulate cryptocurrencies in two ways: The ‘Sell Wall’ effect and The FOMO effect.
- A whale benefits from people buying cryptocurrencies and selling them at a smaller price.
- Whales are trackable. You can do so by using two tools: Blockchain Explorer and Whale Alerts.
