Crypto whales (or simply whales) are individuals and companies that own a significant share of a particular token's issuance. The specific amounts may vary for different cryptocurrencies, but on average, owning 1000 BTC or the equivalent of $30-40 million in other tokens is considered a sufficient reserve to characterize an investor as a "whale." Of course, there are no clear criteria or exact sums, and everything is quite relative. However, these investors often attract significant attention.
Why should we pay attention to whales?
Despite the fact that private investors with relatively small capital dominate the majority of trading in the open market today, rare appearances of whales on centralized crypto exchanges can cause panic even before they take active actions.
The reason is that such investors often enter the market with amounts that exceed the daily transaction volumes in specific directions. Their participation in trading can create temporary artificial imbalances in the supply and demand balance, which contributes to the formation of fair market prices.
Conversely, significant withdrawals from public cryptocurrency exchange wallets often indicate that professional investors believe the market has stabilized.
Cryptocurrency quotes often react to the actions of large holders, so enthusiasts and analysts often keep a close eye on their wallets.
Professional "whale watchers" know a lot about their subjects of observation, including their habits and preferences. Seasoned experts can even predict market movements several hours ahead based on the movement of tokens between whale wallets.
The structure of blockchains allows for real-time tracking of any asset movements. They are quite transparent, although they do not allow matching wallets to specific individuals and companies without additional information, except for a few public wallets (such as hot wallets of crypto exchanges).
What manipulation schemes exist
Pump and Dump
This scheme involves artificially inflating the price. Often, such price surges become self-sustaining. A whale only needs to buy the initial volumes, surpassing resistance levels, and then smaller investors (with varying intensity, depending on the market phase) start buying the rising asset, hoping to sell it a few minutes later at a significantly higher price. However, such schemes usually last only a few dozens of minutes, occasionally a few hours or days. The final action is the "dump" when the whale sells the massively risen in price asset at a more favorable price than before the manipulation began.
This scheme aims to create artificial interest in a specific asset. The essence of such trading lies in the purchase and sale of tokens by the same person (group of investors or company) from different accounts. Ultimately, this creates the impression of high demand and attracts attention to a likely useless token, in which the whales themselves are often interested in selling.
This manipulation scheme is quite common across all financial markets, including cryptocurrencies. The main idea behind this manipulation is to create large buy or sell orders for tokens, creating a "wall" in the market depth assessment. Investors may mistakenly believe that if there are significant orders at a certain price level, they can use them as reference points.
However, in practice, as soon as the market price approaches such a fictitious "wall," whales cancel their orders en masse. The unsuspecting investors who felt secure behind this imaginary barrier of unexecuted orders are suddenly overwhelmed by a wave of counterorders, or their margin positions face liquidation.
This method of manipulation is used exclusively by public whales with a large number of followers. A prominent example of a person who often uses their social resources for cryptocurrency manipulation is Elon Musk. The mechanics of such manipulation are simple: the whale makes public statements about certain intentions, which leads to excitement among the fan group of this whale, which in turn affects the market price.
How to track whales independently?
"Whale movements" refer to the transfer of large sums between different wallets in the blockchain. You can learn about such movements either from analytical reviews by major research organizations or from specialized services.
One of the most popular monitoring services is Whale Alert, which has accounts on social networks. Most often, people learn about large transactions from their Twitter account: https://twitter.com/whale_alert
This account provides instant notifications about large transactions recorded on the blockchain.
Another indirect indication of whale activity can be tracking changes in market depth. For automated monitoring, freely available analytical services like CoinMarketCap or CoinGecko can also be suitable. On the corresponding tab with token information, you can see the current market depth and its dynamics.
It is important to remember two main rules:
- All manipulations are temporary in nature
- Do not try to outsmart the market.
After any artificially created trend, an inevitable correction occurs, which often brings the asset's price back to its pre-manipulation level. Attempts to outsmart the market almost always result in failures - such manipulations are primarily aimed at those who want to profit from high short-term volatility. Typically, inexperienced investors are driven by FOMO (fear of missing out) to engage in hasty operations, resulting in significant losses of their invested assets.
The cryptocurrency market, due to its young age and semi-legal status in most countries worldwide, resembles the "Wild West" and does not adhere to the principles and norms of traditional financial markets. Therefore, whales often go unpunished and continue their manipulations freely.
However, as investors with substantial capital in a particular blockchain, whales themselves are interested in the long-term price growth of their assets. Therefore, they rarely resort to manipulations that cause significant price crashes, unless they are trying to increase their holdings at a lower price. However, even among experienced and savvy investors, there are exceptions, so it is important to take into account any major token movements in the market to avoid being trapped. At the very least, having information about upcoming manipulations can help adjust trading strategies on the exchange.
Tracking crypto whales in itself is not a difficult task but requires a lot of time. Private investors mostly rely on secondary signals from professional market researchers who provide more comprehensive reports with reasoned conclusions and assumptions. The task of every experienced investor is to find suitable sources of information about whales in projects that interest them to reduce uncertainty in their trading strategies.