ZoneBitcoin EditorialOriginally, when we talked about bitcoin whales, we were targeting bitcoin whales, the largest wallets that held bitcoin. Over time, all wallets that hold large amounts of any type of cryptocurrency are designated whales.
Cryptocurrency has been adopted by a large number of retail investors. However, despite the great interest shown by a large number of investors, most of the coins in circulation are controlled by a very small group of people called “whales”.
These wealthy traders and investors have significant positions in the markets. These positions are so large that they can actually influence and impact the bitcoin market to their advantage.
Additionally, it is also highly likely that these investors know each other personally and can communicate regularly about their market positions. This too is an important fact not to be overlooked.
According to Bloomberg, around 1 people could control at least 000% of bitcoin. There is even mind-blowing research that estimates that around 2% of addresses own more than 95% of bitcoin (according to Flipside Crypto).
Keeping this in mind, how much power do these “whales” really have? How have they moved markets before and how are they using their network to influence the price of bitcoin?
Bitcoin whales can profit from their “weight”
Whenever there is a massive rise in the price of bitcoin, followed by a decline immediately afterwards, it is very likely that the whales have made a profit. It's actually the first thing that comes to mind that we see the graphs showing such a sudden decline. We say that the whales must have “eat” (well).
This is what happens very regularly, in fact.
Although this is not necessarily a coordinated or malicious action, the fact remains that an investor with only a few thousand coins can easily have an impact on the markets.
Whales buy the troughs of the wave (Buy The Bit)
Not only do whales like to take profits on the positions they hold, but they also try to actively buy the dips.
In this case, they can also use other market participants to their advantage. Bitcoin whales know that new traders are quite susceptible to market panic and will sell at the first sign of a reversal. This is also the very sign that we are dealing with a beginner if the latter tries to resell everything there is for fear that everything will collapse.
With time, we better understand the Yo-yo effects of the market and instead of panicking, we try to analyze the market to make better decisions.
Therefore, whales may attempt to scare traders with a large sell order. This will create a short-term drop in the price of the coin which will lead other fickle/beginner traders to quickly close their positions. Closing their positions too late, understand.
This will result in an avalanche of sell orders hitting the market and continuing to push the price down. Eventually, when the price has returned to a level attractive to the whale, it will place large buy orders and grab the coins at a deep discount. This is precisely what we call market manipulation. This is the work of a whale on the markets.
Coordinated actions whales among themselves
You know, the world is small when you break it down by professional sector. Great investors know each other just as great doctors “know” each other (if only by name).
Although bitcoin market manipulation is difficult to pin down, it cannot be ignored. Since this group of bitcoin investors is a small community, they could discuss among themselves and plan their efforts through collective action.
Moreover, with the arrival of futures contracts, this made things worse. Whales now have the means to short the price of coins. For example, whales could take short-term positions on their coins and then try to to drain their physical parts.
Before the contracts expire, whales could drive up the price of bitcoin. As retail investors buy into the craze and attempt to profit from the upside, they may sell their coins. This means they would come out with a profit. Once again, they would be winners.
However, this action could also cause the coin price to drop later. Since whales have short positions in futures contracts, they will also benefit from the fall.
When Wall Street gets involved
With the launch of bitcoin futures, there is a whole new group of investors that retail traders should keep an eye on. These are the large Wall Street hedge funds that have the capital to drive the price of bitcoin significantly higher. Finally, some funds also became small whales too, if only because of the crazy amount they were able to obtain in bitcoin. But, even more than the amount of bitcoin they own, it is above all their knowledge of the markets which makes them gain massively.
Funds and large traders also have access to some of the most advanced trading computers and algorithms. These are likely to detect any anomalies or small movements in the price of bitcoin that could lead to a profit. For them, we would talk more about sharks than whales given the actions they are capable of carrying out to make a profit.
One might wonder whether it is really safe to swim in the same pool as the whales and sharks of Wall Street.
Behave with whales: Avoid being the snack
The bitcoin markets can indeed be unfair and sometimes it is a real guerrilla war that we wage. Remember that traders are able to take advantage of beginners by relying on their loss aversion and greed. As a reminder, “Thedislike for la perte is a notion from behavioral economics, it is a behavioral bias which causes humans to attach more importance to a perte than a gain of the same amount”.
Therefore, as a bitcoin investor or trader, it is important to keep your cool. Always stay the course. Don't get caught up in short-term price movements and don't react to irrational movements. Be patient and control your fears.
You should also try to avoid falling victim to market manipulation tactics such as psychosis on information. Here again, it is a great classic that novices fall into. At the slightest news announcing a fall in bitcoin, panic begins to take shape and all you have to do is read another article to sell your assets.
If bitcoin appears to be moving significantly in one direction or the other, there will always be articles to lean into a trend. Be careful what you read and how you interpret it. Sometimes newspapers write simply to report the facts, do not take it as an ultimate production.
No one knows more than you and ultimately the seasoned trader knows it: he speaks and acts in probability and not in certainties.
You should also look at how the spot price of the coins is moving in relation to the futures price, as well as the amount of open interest in the futures markets.
These indicators are likely to give you an idea of whether there are important forces determining the price of bitcoin in the short term.
Keep your cryptos and “Hodl” until the good resale
In trading, we often talk to you about “money management” and with cryptocurrencies, know that it is just as important.
Learn to experience the Bear Markets like a king and not to be frightened by the blows of the whales.
If, however, you don't have the time or knowledge to monitor price imbalances, market movements, and other information, you might as well hold your coins in effect and simply not react.
Investors called “hodlers” who held bitcoins from the beginning were able to make immense profits only because they held their positions for the long term and were not influenced by their sentiment.
This is the only lesson to remember when you want to get started in crypto investing.
In my case, I use sites to optimize my crypto assets and earn interest. This prevents me from panicking at the slightest drop in the market and in the long term, I also collect my passive income with complete peace of mind.
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Disclaimer : This article is provided for informational purposes only. This is not financial, legal, tax or investment advice. Always do your own research before investing in any crypto.
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