What are Crypto Whales and How do they manipulate the crypto market

Whales are the biggest creatures in the oceans and the crypto whales are the biggest creatures in the crypto world. When a crypto whale makes a move in the market, it can send ripples throughout the entire cryptocurrency ecosystem. Crypto whales, especially those holding large amounts of cryptocurrencies like Bitcoin, have the ability to single-handedly change the direction of the entire market.

What are crypto whales?

Crypto whales are individuals or organizations that hold large amounts of cryptocurrencies and have the ability to manipulate a cryptocurrency's prices by suddenly buying or selling large amounts of crypto assets.
To maintain privacy and avoid market manipulation accusations, these whales prefer to stay in the shadows and employ different strategies to conceal their identities and true intentions. The decentralized and transparent nature of blockchain as a public ledger where everyone can check the total supply of a token makes it possible to be aware of potential whale attacks in the future.

What Makes a Cryptocurrency Holder a “Whale”?

While whales have large cryptocurrency holdings, there isn't a set criterion that determines how much cryptocurrency you need to own to qualify as a “whale”. The definition of the whale is subjective and varies by cryptocurrency. A crypto holder that possesses a substantial portion of the total supply of a cryptocurrency can be considered a whale.

How crypto whales manipulate prices

Whales employ different strategies to manipulate the market to their advantage. Some of these strategies are described here.

I. Pump and dump strategy

In the pump-and-dump strategy, whales drive up the prices of a token by buying it in large quantities and spreading positive news about it in the crypto market. Once the price of the token rises significantly, they quickly sell off their holdings, causing a market crash and leaving other traders at a loss.
One example of a pump-and-dump scheme in the cryptocurrency market is the case of Centra Tech. In 2017, Centra Tech conducted an initial coin offering (ICO) to raise funds for its cryptocurrency project. The company claimed to offer a debit card that would allow users to spend various cryptocurrencies, including its own token called Centra (CTR).
In order to attract investors, the company promoted fictitious content on its websites and employed other deceptive strategies like fake celebrity endorsements and fake associations with financial institutions to artificially inflate the price of CTR. Once the founders had raised $25 million from investors, they suddenly started to sell holdings, causing CTR prices to plummet and leaving many investors empty-handed.

Sam Sharma, the co-founder of Centra Tech, was sentenced to 8 years in jail in 2021 for conducting an illegal ICO.

II. Spoofing

Spoofing is another tactic used by whales to artificially influence prices by creating fake buying and selling orders to create a false sense of market demand and supply. These tactics make other traders act in the whales' favor to get their desired profits.

Spoofing is usually carried out using algorithms and trading bots that quickly cancel these orders before they are ever executed when the market is in its desired condition.

III. Wash Trading

Wash trading is a form of fictitious trade where whales buy and sell crypto among themselves to create artificial trading volume. This activity generates interest from investors and leads them to buy a particular token at an artificially high price.
It's as though you published a novel and to make it look popular, you bought several copies of the novel yourself. Wash trading is considered illegal in major jurisdictions.

Why You Should Track Crypto Whale Activity

Keeping an eye on whales' activity gives you an insight into where the market may be headed. By monitoring their trading patterns, you can have a better understanding of market conditions and price fluctuations as whales often have insider knowledge about the future of the projects. Moreover, whales are the “big fish” in the crypto world who have achieved significant success through their experience. By tracking their activity, you can observe their strategies, trading patterns, and decision-making processes to stay afloat in the ever-changing crypto market.

How to Track Crypto Whale Activity

Tracking crypto whales can be challenging since they prefer to remain anonymous. However, you can still track their activities in the following ways.

I. On-Chain analysis

Crypto whales can be tracked through on-chain analysis, which involves analyzing the data recorded on the blockchain. By analyzing data on the blockchain, you can see what traders do with their holdings.
There are millions of transactions recorded on the blockchain each day and examining each transaction is an impossible task. Ignoring small transactions and focusing on significant transactions will provide a clearer picture of actions taken by whales.

II. Whale Alert Services

There are real time warning services and platforms in the crypto market that track and report large transactions in the cryptocurrency market. Whale Alert is the largest whale tracking platform; it offers both free and paid services to wallets and alerts them immediately of any great movement of tokens in the blockchain network.

III. Monitor their social media activities

You can also track whales' activities by monitoring their activities on social media platforms, especially Twitter, where they share their insights, trades, or market sentiment. Following these big fish may help you to gain valuable information to anticipate the upcoming market condition.

Biggest crypto whales in 2023

Here are some publicly known crypto holders with large amounts of crypto assets in 2023.

I. Satoshi Nakamoto

Satoshi Nakamoto, the mysterious creator of Bitcoin, holds about 1.1 Bitcoin, around 5% of the total supply of Bitcoin. If he ever moves his crypto holdings, it will have a significant impact on the cryptocurrency market and beyond.

II. MicroStrategy

Michael Saylor, Microstrategy’s CEO, started buying Bitcoins in 2020 and the company now holds 114,042 Bitcoin, which is worth over $4 billion.

III. Tesla

In early 2021, Tesla made headlines by announcing a significant investment in Bitcoin. It announced that it had bought about $1.5 billion worth of Bitcoin as part of its treasury management strategy. Tesla now owns 43200 Bitcoin, valued at more than $1.5 billion.

IV. GrayscaleBitcoin Trust

GrayscaleBitcoin Trust is an investment vehicle offered by Grayscale Investments, a leading digital asset management firm. The company holds 643572 Bitcoins, which is about 3% of the total supply of Bitcoin.

Conclusion

Crypto whales have more knowledge and trading experience than an average investor does. So keeping an eye out for whales' activities may provide valuable market insights to gain a better understanding of the market dynamics and to make more informed decisions.