Cryptocurrency market whales: Who are they and how do they profit on market situation in 2019!

Jeremy Stone Trading Strategies Read 5min

Cryptocurrency market whales: Who are they and how do they profit on market situation in 2019! 1

If you compare cryptocurrency market with ocean, ordinary traders will be small fish in it. Pumping groups are sharks, and largest asset holders are whales. Many people think that whales completely control market and can collapse it at any time. But is this really case and can ordinary investors benefit from whales ‘ actions?

Who are whales in cryptocurrency market?

Whales are big players. They own huge amount of cryptocurrency. They can manage market by buying and selling assets.

Whales are found in usual stock market, but in cryptocurrency market they have much more opportunities:

  • The capitalization of cryptocurrency market (about $ 300 billion) is much lower and it is much easier to concentrate huge number of coins than trying to become whale in usual market (with capitalization of $ 65 trillion).
  • Despite strengthening of state control over cryptocurrency market, there is no question of large-scale regulation. Whales can operate huge sums without feeling pressure from banks and financial regulators.
  • The cryptocurrency market is still very young and operates according to laws uncharacteristic of ordinary market. Price of cryptocurrency is determined only by demand, and having large assets, it can be manipulated.

The main sign of whale is presence of large amount of cryptocurrency. Its main goal is to manage rate of this cryptocurrency for its own benefit, and for this it is necessary that coin is in demand and very popular.

Cryptocurrency market whales: Who are they and how do they profit on market situation in 2019! 2

Thousands of small fish pour their money into common ocean, and whales can make money from it. That is why main habitat of cryptocurrency whales has become bitcoin market.

Several species of whales operate on it:

  • Early followers of bitcoin, who were first to mine or buy huge number of coins and have thousands or even tens of thousands of BTC in their accounts.
  • Rich investors who bought bitcoin at dawn of its popularity.
  • Large investment and hedge funds.
  • Large companies that have opportunity to profitably buy or mine huge number of coins (for example, cryptocurrency exchanges or manufacturers of mining equipment).

According to recently released data, 109 people hold in their hands about 80% of all mined bitcoins. These are whales that have real leverage over BTC market rate.

Here is just small list of most famous bitcoin whales:

  • Roger Ver (150 thousand BTC).
  • Binance exchange (160 thousand BTC).
  • Bitfinex exchange (190 thousand BTC).
  • Bitmain Company (350 thousand BTC).
  • The Winklevoss Brothers (450 thousand BTC).
  • Bitcoin Creator Satoshi Nakamoto (many sources claim that he owns million coins).

In addition to bitcoin, there are other cryptocurrencies, large amounts of which are concentrated in hands of narrow circle of people. For example, 40% of all existing ETH coins fall on top 100 crypto-wallets of Ether. And cryptocurrencies Qtum, Gnosis and Storj, this figure reaches 90%.

But in view of largest capitalization and market value of BTC, most influential in market are bitcoin whales.

Although skeptics claim that there are no whales, and value of cryptocurrency can not be controlled by small group of people, fact remains. There are people who own colossal cryptocurrency assets. And it allows them to manage market.

What are strategies used by whales on cryptocurrency market?

Among strategies that whales use in cryptocurrency market, following can be distinguished:

Rinse and repeat

Cryptocurrency market whales: Who are they and how do they profit on market situation in 2019! 3

The main goal of this strategy is to reduce price of cryptocurrency as much as possible, so that you can buy it on cheap.

Kit massively sells assets at price below market, ordinary investors are frightened of collapse of cryptocurrency and begin to drain themselves. Rate drops even lower, and Keith buys coins at sharply falling price. Because of mass purchase, price rises again, and whale repeats its cycle.

For example, whale has 10,000 BTC. current rate is 8000 dollars, and whale puts orders for sale at 7800 dollars.

Let’s say he throws 6000 BTC on market. Noticing this, ordinary traders will decide that bitcoin goes into negative trend or even collapses. And they will begin to get rid of their assets. If drain becomes massive (and this is what whales are seeking), value of BTC can drop to $ 7,000 or even lower. Then whale will return to itself those 6000 bitcoins which sold, and will buy additional coins at lowered price.

Now let’s count. Keith sold his 6,000 BTC for $ 46.800 million. If rate falls to 7000 dollars, with this money he will be able to buy 6685 BTC. That is, his dirty profit will be $ 4.795 million. And that’s just one rinse. And Keith is interested in “rinsing out” as many bitcoins as possible from ordinary traders.

Spoofing attack

The main goal is to create appearance of collapse or growth of cryptocurrency. To do this, whale does not even have to throw out its own assets on market. It is enough for him to place very large orders and cancel them before they are executed. At same time, orders for both buying and selling cryptocurrency are triggered.

In first case, whale places large order to buy cryptocurrency (for example, BTC), thereby increasing purchase price. Other traders see this and, expecting jump in rate, begin to buy bitcoin EN masse. Keith waits until price reaches peak, cancels order and sells some of his assets at an inflated cost.

In second case, it creates large order to sell bitcoin at price below market. Panic begins, and ordinary investors massively merge their assets. Keith waits for maximum price drop, cancels his order and buys bitcoin.

In this strategy, main thing is to place orders that can not be executed.

For example, if whale puts up for sale 10,000 BTC at low price, and rest of traders have enough money to buy them back. He’ll just lose his assets. If traders are unable to redeem entire amount, rest of players will either have to wait for order to be executed, or lower sale price themselves. And that’s playing into Keith’s hands.

Playing outside exchange

Many experts believe that largest players in cryptocurrency market trade assets on OTC market. This is kind of black market where whales can non-publicly buy huge amount of cryptocurrency.

Non-public trading is conducted in closed groups, through large OTC brokers or on exchanges that offer so-called private bets.

Especially popular among whales are brokers who offer their customers prices below exchange and work only with largest players.

For example, well-known OTC brokers Circle and Cumberland have introduced limit on admission of new participants: 100 thousand dollars-to enter circle of favorites and 250 thousand dollars – to trade cryptocurrency.

Working through such brokers, whales can buy cryptocurrency from each other and even coordinate their actions. After buying up large number of coins, they go to usual exchanges and move cryptocurrency rate in right direction.

From outside it may seem that whales are same pampers only higher level. But this is not entirely true.

Pampers artificially increase rate of altcoins, suitable for Pump&Dump. Create buzz in cryptocurrency community, manipulate info pods, collect pampas for purchase of coins and so on.

Whales are rocking course of cryptocurrency, holders of which they are. Often they also act together, and main goal of most whales is bitcoin. Little-known altcoins do not interest them.

How do whales affect cryptocurrency market?

Many investors, having read about whales, think that latter have an extremely negative impact on market and simply take profits from small players. Moreover, conspiracy theories have long been discussed in cryptocurrency community, from which it follows that whales want to either collapse entire market or completely take it into their hands.

But is it really so? Let’s answer this question by analyzing arguments of conspiracy theorists.

For example, this: whales stockpile bitcoin to control market after end of mining era. According to estimates, in 5-6 years all BTC will be mined, and developers will have to transfer network to PoS-mining. This means that largest holders of coins will manage market. Whales, that is.

Many believe that winter collapse of bitcoin was provoked by whales. They are already preparing for PoS-mining and drowning cryptocurrency to buy as many coins as possible.

However, due to collapse, huge number of users left bitcoin community, and many potential investors simply did not enter it, waiting for next fall. Bitcoin went into downtrend, and it hit not only ordinary traders.

Whales benefit from cryptocurrency being in demand and having largest possible community. When it falls in value, their assets also become cheaper. That is, in long term, it is simply unprofitable for them to collapse cryptocurrency.

On this argument, other hypotheses related to deliberate collapse of market by whales are broken.

According to experts, presence of whales is not negative phenomenon. This is normal phenomenon for any market. Large asset holders always set vector of development and unite to guide market.

To some extent, whales even have positive impact on market. As long as they are interested in cryptocurrency they hold, they are also interested in ensuring that it does not collapse.

Moreover, many whales (the same Nakamoto) do not even use their assets in order to lower or increase rate of cryptocurrency. They just keep coins in their wallets, maintaining balance in market.

But even those whales who play with walls of sales and “rinse” bitcoin can be useful for ordinary investor. Main thing is to catch wave created by them in time.

Cryptocurrency market whales: Who are they and how do they profit on market situation in 2019! 4

How can an ordinary investor profit from actions of whales?

All experienced traders know that wave from China is an ideal opportunity to enter market.

For example, when whale plays for decrease and puts up huge orders to sell cryptocurrency at price below market, rate naturally falls. Most traders start draining assets, but it’s much smarter to start buying them, as Keith himself does.

When whale increases cost of buying cryptocurrency and other traders begin to buy it, growing rate, it’s time to sell their assets profitably.

The only caveat-it is important to notice whale trend in time. Ordinary investor has two ways how to do it:

Cryptocurrency market whales: Who are they and how do they profit on market situation in 2019! 5

  • Monitor movement of funds on largest cryptocurrencies (in particular, BTC). You can do this on website www.bitinfocharts.com. Any large deduction from balance of purse indicates that whale throws out its assets on market, which means that you need to wait for changes in exchange rate. If it falls sharply, it makes sense to quickly buy cryptocurrency, if it suddenly jumps-to sell. Most obvious signal for investor – deductions are made from several top wallets at once.
  • Follow order log on top cryptocurrency exchanges. Appearance of huge orders for sale and purchase of cryptocurrency in most cases is associated with whale games. If you see clearly inflated wall of buying, do not rush to buy coins-it is better to wait for peak and sell your assets at bargain price. If whale creates appearance of collapse (inflates wall of sale), wait for serious decline and buy coins. After all, soon Keith will buy them on cheap and raise course.

But inexperienced investors are better off not using whale trends. After all, for this you need to be able to determine inflated walls of sale and purchase, analyze overall situation in market and correctly assess situation on exchanges.

If you have such skills, following whales can become quite successful strategy for earning on cryptocurrency.

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