In the world of crypto, “whales” are individuals or organisations that hold enormous quantities of a particular cryptocurrency.
They usually own more than 10% of crypto. For example, MicroStrategy owns nearly 130,000 bitcoins (BTC) and can move the price of BTC through their market participation. With their buying/selling power, crypto whales can influence the price of respective crypto tokens and disrupt crypto markets with relative ease.
Investment firms such as Pantera Capital, Fortress Investment Group, and Falcon Global Capital are examples of such whales in the cryptocurrency market. If they buy a crypto token in bulk, the price of that token will increase. Conversely, if they dump a token, the price of that token will decrease significantly.
Most of the crypto whales don’t trade on traditional cryptocurrency exchanges since their massive orders may swamp the existing volume on the order books. Instead, they trade coins off the exchange books, in a practise known as Over the Counter (OTC) trading.
Whales hold significant power in on-chain governance procedures on Proof-of-Stake (PoS) blockchains (more funds at stake gives them more voting power). The presence of whales in these networks could be a good sign (in terms of stability) because they have significant incentives to perform honestly and help the network thrive. On the other side, having whales control the majority of funds can have a detrimental impact on power centralization.
Monitoring Trading Activity of Crypto Whales
Since cryptocurrencies were designed to provide a greater degree of anonymity, it is hard to directly link accounts to individual persons or organizations. As a result, identifying who each whale is, where they live, what job they do, what institution they belong to, and why they are making this transaction is difficult.
However, by inspecting the blockchain data of those who have made their public addresses public, it is possible to identify at least some of the individuals who hold considerable quantities of various coins. In reality, several of these individuals are well-known Bitcoin whales.
This makes it critical for retail crypto investors to monitor the largest wallets and stay on top of major changes in their holdings in order to adjust their trading strategy accordingly.