What are Crypto Whales and How Do We Trade With Them Running the Show?

2019/06/17

Image from Bitcoin News

In terms of money, the world of Bitcoin and cryptocurrency is ruled by entities called “whales”.

Some whales are institutional investors, well-known entities in the traditional markets and maverick funds that are venturing into the brave new world of crypto and making significant moves.

Others are traders and investors of mass amounts of cryptocurrency that has been in the scene since its dawn.

Why are they called whales anyway?

Well, the crypto market can be compared to a stormy ocean where small fish follow the current to survive or go against it to be wiped out. However, in this stormy ocean, there are big swimmers as big as whales who can hold themselves or even influence the current, especially when they band together. Rallies can be compared to feeding frenzies, volatility as waves, and storms as bear markets.

Famous named personalities that were revealed as whales are the enigmatic Bitcoin founder Satoshi Nakamoto and the Winklevoss twins.

Crypto enthusiasts claim that they have tracked Nakamoto’s wallets and estimate his BTC holdings at about a million coins. Cameron and Tyler Winklevoss were famous for the Facebook controversy years ago. Since then, they were running the Gemini exchange that caters mostly to institutional Bitcoin investors. At one point, people claimed that the twins held 1% of all Bitcoin in circulation.

Other more well-known whales are categorized under hedge funds and Bitcoin investment funds. Those who chose to appear on the surface include Pantera Capital, Fortress, and Bitcoins Reserve.

Funds like these normally manage Bitcoin by the hundred thousand. They strategically manage their crypto funds in secret in exchanges via special arrangements, hidden from the eyes of small-time retail traders.

Large capital mass enables institutions to move the market on a whim. This capital mass turns them into “whales” that do not need to get out of the way when market waves crash. Especially when together, whales are strong enough to deflect current to the point that they direct it themselves.

However, sudden whale moves, or abrupt entering of large transactions, are advised to be done when selling only. Large capital mass is recommended to be moved in tranches across a relatively long period.

How Whales Turn Small Fish into Money

Whales always want to maximize the profitability of their large trades. They do this by having the retailers (small fish) join them in their move. They convince the small fish by priming the market (reading bigger-picture market conditions, assess the mood of the retailers, and the willingness of market participants to follow a particular move.

Once the opportunity is spotted, they will massage and warm up the market to steer the participants to their desired direction. Besides the trading capital, this is actually their investment that will need ROI. Once they bait and herd the retailers into the rally, the slingshot effect will be crisper.

If you find this very appalling, then you should get used to it because there’s nothing new about this. This is a standard institutional fund practice. Large banks, the biggest market makers of the foreign exchange market, even have trader teams that do solely this exact method via trade plans that last from days to weeks.

In the crypto market, there are no large banks. There are only whales and these whales find the crypto market a paradise for speculation and high-risk investment.

1. Small market capitalization (especially compared to forex)
2. Relatively clueless participants
3. No large banks to compete with
4. No regulators to appease

Many whales have been in the crypto space for more than two years already. With the amount of capital and influence they have, it’s only normal to assume that they work together and coordinate their actions for their own ends, without any regard for the financial well-being of the retailers they manipulate.

Those retailers who happen to have large amounts of cryptocurrency to trade may even be aware of this but do nothing because it’s cheaper and safer to just swim with the whales.

Such a choice may be the right one for other small crypto fish to make. Just swim with the crypto whale and save yourself when the mood starts being unpredictable. Knowing when that will happen might be the true key in crypto investing.

If you happen to want to be a whale but have no funds to trade like institutions, you can try buying tokens at very low prices. If you’re lucky or good enough, you might become a whale. However, the risk is still big and a loss is a loss when the market goes against you.

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