What are crypto whales?

What are crypto whales?

A cryptocurrency whale, more commonly referred to as a "crypto whale" or just a "whale", is a cryptocurrency community term that refers to individuals or entities that own large amounts of a particular cryptocurrency. Whales own enough of some cryptocurrencies to have the potential to manipulate currency valuations.

Achieving whale status in the cryptocurrency space is subjective. For the most part, the community seems to agree that a large percentage of available coins make the account a whale. In general, whales seem to make up more than 10% of the total number of a given cryptocurrency.

Large cryptocurrency owners are called whales because whales are very large compared to the smaller fish in the cryptocurrency ocean. Four Bitcoin wallets held 3.49% of all bitcoins in circulation in May 2022, and the top 100 wallets held about 15.36% of all bitcoins. Dogecoin, a meme coin that has become very popular, is even more centralized. In May 2022, 15 addresses accounted for almost 52% of Dogecoin, with more than 29.5 billion coins. Such large accounts are closely watched by the crypto community and investors. If any of the top 100 wallets make a transaction, it is publicly announced via the Whale Alert website and Twitter account as soon as it happens.

The effect of crypto whales on liquidity

Being high-profile wallets, whales can be a problem for cryptocurrencies due to the concentration of wealth, especially if it sits still in an account. When coins sit in an account instead of being used, it reduces the liquidity of the cryptocurrency because fewer coins are available. Whales can also cause price volatility, especially when they move a large amount of cryptocurrency in a single transaction. For example, if an owner tries to sell their bitcoin for fiat currency, the lack of liquidity and the size of the transaction puts downward pressure on the bitcoin price as market participants see the transaction. When the whales sell, other investors become on high alert, watching for signs that the whales are "dumping" their holdings. A common sign that investors look out for is the mean value of an exchange's inflows, or the average amount of a particular cryptocurrency being deposited on an exchange. If the average amount of coins per transaction rises above 2.0, it means whales are likely to start dropping if it correlates with a large number of whales using the exchange.

What do crypto whales mean to investors?

There are many circumstances in which someone with a large amount of cryptocurrency can move their holdings. It should be noted that movement does not always mean whales sell their possessions; they could change wallets or currency exchanges or make a big purchase. Sometimes whales may try to sell their assets in smaller amounts over a longer period to avoid drawing attention to themselves, and they can produce market distortions, sending the price unexpectedly up or down. Because of this, investors look at known whale addresses to look for the number of transactions along with their value. In conclusion, if you are a crypto investor, it is a good idea to pay attention to what the whales are doing. However, moving doesn't necessarily mean you should panic.