A quick browse through crypto headlines and the term ‘whale’ is bound to come up at least once. The industry is very fascinated by crypto whales, to the point that there are entire websites set up just to track them. On top of this, whale activity is often cited as the basis for price predictions and overall, the industry has a clear case of whale mania.
What is a Crypto Whale?
First things first, it is important that we know what a crypto whale is. A crypto whale is a person who holds a very large amount of a particular token, so much so that their actions can influence the market movement of the token. Opinions vary but many believe that an investor must have at least 5-10% of the total supply of a token to be considered a whale.
Now, consider the average investor who might have one or two ETH or BTC tokens. If they sell off these tokens, it doesn’t do much to shift the market in itself because those are just a few out of the millions of tokens in existence. Now, imagine a single investor had 10,000 BTC tokens, which are worth almost $700,000,000. If this person sold all of their tokens at once, it could lead to a dip in the value of Bitcoin because of the sudden influx of tokens.
That level of sell-off would usually take thousands of smaller investors to pull off. But if one person can do it, they are considered a crypto whale.
The interesting thing about crypto whales is that some are anonymous and some are well-known. Take Michael Saylor, an American businessman who owns over 17,000 Bitcoin tokens. He is considered a crypto whale who could disrupt the market in a massive sell-off if he wanted. But the most famous Bitcoin whale is arguably Satoshi Nakamoto, the creator of Bitcoin who has been anonymous for years and is alleged to have a million Bitcoin tokens.
What Do They Do?
Now that we know what crypto whales are, it is worth looking at what they do. Now, whales, by their definition, are not necessarily the most active crypto users. The typical crypto user might buy and sell tokens frequently, play blackjack, roulette, and other casino games at sites like this, wager on crypto sports betting sites, buy goods and services with crypto, and so on. But whales, not so much.
After all, if they were constantly selling off their crypto, they would soon lose their whale status. On top of this, it is not very beneficial for them to do so. Say a Bitcoin whale has 10,000 tokens. If they began selling them off en masse, the value of Bitcoin would crash overnight and they would progressively get less money as they did so. Plus, many whales tend to be developers (like Satoshi) and hardcore crypto heads who want the industry to succeed, so they are less likely to mass sell. This isn’t to say that whales never sell. Instead, they do so less frequently and not usually en masse.
It is more common, however, for crypto whales to accumulate crypto over time. Many whale wallets have been known to increase their stock over the years and this gives them even more power. Whales also frequently move funds from one wallet to the other for different reasons.
Another common whale activity is simply doing nothing. There are many whale wallets holding millions of dollars worth of crypto that have not seen activity for years. This gets people speculating about whether the whales are HODLing or simply lost their wallet passwords.
Why Are They Important?
Why is the crypto sector so fascinated by whales? Why are there Twitter/X accounts and tools dedicated to tracking whales’ every move? There are a few reasons for this. First, whales have the power to disrupt the markets. Crypto investors are constantly on the lookout for any signs that the market will soar or crash and whale activity can be one of them.
If whales seem to be buying up a lot of crypto, it could mean that a price rally is imminent. If whales are selling, it could mean that the price will crash, whether because of them or for other reasons. Like it or not, whales have a lot of power in the markets.
Then there is the mystique around whales, many of whom are anonymous. The idea of an unknown person with millions of dollars worth of crypto just sitting in a wallet is fascinating to most of us, especially since we can monitor their activities. Outside of the financial aspect, crypto whales are simply fun to watch.
Conclusion
Crypto whales are big players in the industry and wield an unbelievable amount of power. While they are a minority in the sector, it is important for investors to understand who they are and why they are important. This will help you to make sense of the reporting around whale activities and understand how this can affect your own portfolio.
Outside of these financial implications, taking part in whale watching with other investors could very well help you embed yourself deeper into the industry.