There are two ways including creating a Sell Wall and capitalizing on the FOMO of small investors in which whales can turn the crypto market trends to make profits those Creating a Sell Wall.
Whales use this method when they want to lower cryptocurrency prices to accumulate more tokens (coins). This is done as the whales create a sell wall by putting a large ‘sell order’ at a lower-than-market price.
The basic Demand and Supply principle work here, i.e., higher demand at a lower price and higher price at lower supply.
Once the whales reduce the price of tokens and put them up for sale, the demand for them rises, inducing all other sellers to lower their prices.
As a result of this price suppression, a panic chain reaction is created just like a ripple created by a stone thrown in the ocean.
When the whales have created enough panic and the coin’s trading price has reached its desired level, they would pull back the sell order and buy new coins, becoming stronger.
Capitalizing on the FOMO of small investors
This method is the opposite of creating a sell wall as here the whales send out a ‘buy order’ at a price comparatively much higher than the market price.
Being influenced by the whales, other bidders also raise the prices of their tokens leading to artificial inflation of the currency price.
This method requires a couple of whales to act with coherence. Being impacted by this price pumping, all investors including small investors, face the fear of missing out (FOMO).
From the sudden rise in prices, the investors understand that this is a profitable investment opportunity that must be seized immediately before a further price surge. Consequently, the whales sell their coins to the investors at a great profit.
Watching Whale Movements
Provided the tactics used by whales to manipulate the crypto-market, it becomes necessary for other investors to observe the whale movements so that rewarding decisions, unfettered by whales, can be made.
Even though the crypto whales are kept pseudonymous, certain platforms track their account wallets and corresponding transactions. Such platforms include Glass node, Crypto quant, and Blockchain.
As the supply of a cryptocurrency is concentrated with the whales, a transaction intended to sell those coins can cause the token’s price to drop considerably. But every whale transaction is not meant for sale.
It can also be a ‘supply on exchange’ transaction made to sell or a ‘supply off-exchange transaction made to hold the coins.
It can be a large purchase or several small purchases over some time. Then, it can also be a wallet-to-wallet exchange having a minimum impact on the price.
Factors like the size of the transaction, age of the whale, market depth, and Tokenomic factors should be considered while analyzing whale movements.
Understanding background
After centuries of trading in commodity and paper money, ‘Cryptocurrency’ emerged as the dawn of a new era of digital currency in 2009, with Bitcoin as the first crypto coin.
Cryptocurrency is a virtual money trading platform where crypto coins are used as a unit of account and store of value.
This new platform for exchanging electronic money revolutionizes our current, flawed monetary and financial system. Cryptocurrency is a glimpse of the future to which everyone is looking up.
Where the excessive money-printing central bank institutions would seize to exist, allowing the people to enjoy greater confidentiality, security, freedom, and fairness in their transactions, this article would provide insights into crypto-whales and their money-making methods.
What are Crypto Whales?
The individuals, groups, or institutions that hold huge amounts of cryptocurrency are known as the ‘whales’ of the Cryptocurrency Ocean that can substantially influence the small traders or fish.
There are no fixed criteria for a crypto whale but generally, anyone who buys at least 10% of the total of any cryptocurrency can become a whale.
For instance, in the Bitcoin market, a whale is anyone who holds 10,000 Bitcoins or more which will amount to millions and billions of dollars.
A total of 40% of the whole Bitcoin market is in the hands of a few thousand whales giving them great power to manipulate it according to their needs. Some whales hoard their coins intending to sell them when prices surge.
In comparison, others use their coins for fluctuating market trends in their favor. That is why investors need to keep an eye on whale movements. Crypto account holders’ identity is kept confidential.
Still, according to the record of transactions stored in the ledger, Satoshi Nakamoto, Brian Amstrong, Winklevoss Twins, Micheal Saylor, Pantera Capital, and Fortress Investment Group are presumed to be some of the whales.
How do Whales affect the Crypto Market?
The role of whales in controlling the crypto-market trends can be realized from the events of Shiba Inu in October 2021, Ether in February 2021, and the case of Bitcoin in 2017 and 2020.
Last year between October and November 2021, the cryptocurrency Shiba Inu (SHIB) experienced a surge in its token price due to which a total of $20 billion was raised in capital.
After research, it was discovered that this surge was attributed to the eight whales who dominated 70.52% of the SHIB market. These crypto whales used the strategy of price pumping to benefit from the FOMO of many investors.
Subsequently, these whales made a profit of 800% on their investments that month. Similarly, in 2017, the Bitcoin price surged to $20,000 per coin due to price pumping by a single Bitcoin whale.
Another common example is the BearWhale incident that occurred in 2014, where a Bitcoin whale called BearWhale put up all 30,000 of his Bitcoins as a massive sale order because of which the BT price stooped quite low.
Concluding Remarks
In a nutshell, crypto whales are similar to any other big player of a stock market or a business market with one important distinguishing factor regarding legal implications. Any law or government does not govern the crypto market.
The tactics used by crypto whales that have drastic impacts on the volatility and liquidity of crypto coins are illegal in other trading and investment platforms but acceptable in the crypto market.
Therefore, the fish of the crypto-ocean should take precautions against the rippling effects of whales on them by monitoring their movements and acting accordingly.
From the whales’ perspective, cryptocurrency is a great platform for them to make loads of profit.
Frequently asked questions
What is FOMO in cryptocurrency and how is it related to the world of crypto?
FOMO stands for fear of missing out. It means the market signals to the investors’ price for the goods/commodity is continuously rising. So, they must purchase the commodity to benefit from the increasing price of the commodity.
Usually, in the crypto market, whales use this concept to make Money by manipulating the small market investors.
Can we overcome FOMO as a small investor?
The best possible way to control your emotions while investing. It’s said that the best investment time is when prices are falling and not when there is a continuous increase.
So, it’s a good idea to look for the currently undervalued investment with the potential to resume its real position.
This principle seems effective in saving from FOMO. Further, it’s applicable in all types of the market, including equity, stock, crypto, etc.
When do we use the term “bubble” for the crypto?
Crypto is said to be in a bubble when the current trading price is higher than its real price; when the bubble bursts, the crypto prices go down. Hence, the investors that invested at artificially higher amounts lost their Money.
On the other hand, the investors that sell at higher prices gain on the crypto. So, it’s advisable to control your emotions while you invest in the crypto market.
Further, it’s important to note that intensity fluctuation is much higher in crypto than in other investment types. Hence, one must take due care while investing.
