What Is a Crypto Whale and How Do They Affect Crypto Markets?

What Is a Crypto Whale?

A cryptocurrency whale, more commonly called a "crypto whale" or just a "whale," is a cryptocurrency community term that refers to individuals or entities that hold large amounts of cryptocurrency. Whales own enough cryptocurrency to influence currency markets.

Achieving whale status in the cryptocurrency space is subjective. The community seems to agree that ownership of a large amount of circulating cryptocurrency qualifies a whale.

Learn more about crypto whales and how these large accounts can influence cryptocurrency investors and the market.

Understanding Crypto Whales

Large cryptocurrency holders are called whales because whales are very large compared to the smaller fish in the cryptocurrency ocean. According to BitInfoCharts, four bitcoin wallets owned 3.49% of all the bitcoin in circulation in May 2022, and the top 100 wallets held around 15.36% of all bitcoin.

Dogecoin, a meme coin that became popular, is even more centralized. In May 2022, 15 addresses accounted for nearly 52% of Dogecoin, more than 29.5 billion coins.

These large accounts are closely monitored by the crypto community and investors. If any of the top 100 wallets make transactions, they are publicly announced via the Whale Alert website and Twitter account as they occur.

A Whale's Effect on Liquidity

Because they are high-profile wallets, whales can be a problem for cryptocurrency because of the concentration of wealth, particularly if it sits unmoved in an account. When coins sit in an account rather than being used, it lowers that specific cryptocurrency's liquidity because there are fewer coins available.

A Whale's Effect on Price

Whales can also create price volatility increases, especially when they move a large quantity of cryptocurrency in one transaction. For example, if an owner is trying to sell their bitcoin for fiat currency, the lack of liquidity and large transaction size creates downward pressure on Bitcoin's price because other market participants see the transaction. When whales sell, other investors go on high alert, watching for indicators that whales are "dumping" their holdings.

A common sign crypto-investors watch for is the exchange inflow mean, or the average amount of a specific cryptocurrency being deposited into exchanges. If the mean amount of coins per transaction rises above 2.0, it means that whales are likely to begin dumping if it correlates to a large number of whales using the exchange.

The price is influenced not only by the inflow mean, but also by the publicity given to a particular Whale's transaction. Thus, Bitcoin prices only respond to transactions involving large amounts of cryptocurrency when they are publicly announced on Twitter by Whale Alert.

What Crypto Whales Mean to Investors

There are many circumstances in which someone with a large amount of cryptocurrency could move their holdings. It should be noted that movement doesn't always mean that a whale is selling off their holding; they could be changing wallets or exchanges, or making a large purchase.

Sometimes, whales may try to sell their assets in smaller amounts over a more extended period to avoid drawing attention to themselves, they can produce market distortions, sending the price up or down unexpectedly. This is why investors watch the known whale addresses to look for the number of transactions along with their value.

If you're a crypto investor, it is a good idea to pay attention to what the whales are doing. However, movement doesn't necessarily mean you should panic. Many whales are business owners who have invested heavily in cryptocurrency—if you're going to whale watch, these might be the ones worth observing.

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