A crypto whale, more commonly known as a “crypto whale” or simply “whale,” is a term in the crypto community that refers to individuals or entities that hold large amounts of cryptocurrency. Whales own enough cryptocurrency to influence currency markets. Let's see what a crypto whale is and how they affect the crypto markets.
What is a crypto whale
Achieving whale status in the cryptocurrency space is subjective. The community seems to agree that ownership of a large amount of cryptocurrency in circulation qualifies as a whale. There are many circumstances in which someone with a large amount of cryptocurrency could move their holdings. It should be noted that movement does not always mean that a whale is selling its holdings. They may be changing wallets or exchanges, or making a big purchase. Sometimes whales may try to sell their assets in smaller amounts over a longer period to avoid drawing attention to themselves. They can produce distortions in the market, causing the price to rise or fall unexpectedly. For this reason, investors monitor known whale addresses to see the number of transactions along with their value.
Types of crypto whale according to the number of tokens they own. Source: Glassnode.
Who is a crypto whale
Large cryptocurrency holders are called whales because they are very large compared to the smaller fish in the cryptocurrency ocean. Four bitcoin wallets held 2,81% of all bitcoin in circulation as of June 2023, according to BitInfoCharts, and the top 100 wallets held more than 15% of all bitcoin. These large accounts are closely watched by the cryptocurrency community and investors. It is announced publicly on the Whale Alert website, on their Twitter account if any of the top 100 wallets transact. We can also use tools such as Arkham or DeBank to detect the movements of this type of wallets.
Tweet notifying a movement of 2.999 BTC worth $87 million. Source: Whale Alert.
Influence of a crypto whale on the liquidity and price of a token
Whales can be a problem for cryptocurrencies because they are high-profile portfolios and because of the concentration of wealth, especially if it remains idle in an account. The liquidity of a specific cryptocurrency decreases when coins remain in an account rather than being used, as fewer coins are available. Whales can also create increases in price volatility, especially when they move a large amount of cryptocurrency in one transaction. For example, the lack of liquidity and the large size of the transaction creates downward pressure on the price of Bitcoin if a holder attempts to sell their bitcoin for fiat currency because other market participants see the transaction. Other investors become alert when whales sell, watching for signs that they are “dumping” their holdings.
Crypto whales notably influenced the big crash of March 2020. Source: CryptoQuant.