“Whale” is the term used referring to an investor with a lot of budget and has the capability to move the market by buying or selling in really large volumes. The movements of crypto whales can provide important price signals to alert investors compared to other sectors.
The London Whale
Lately, the term “whale” that was derived from the traditional financial markets was used in mainstream media to picture Bruno Iksil, also known as the “London Whale”, a former J.P. Morgan trader who was able regain a loss of $6.2 billion trading credit derivatives for the bank’s Chief Investment Office (CIO).
It is necessary to be aware of Bitcoin whales and how they can probably affect the crypto asset market. Considering the tolerably small size of the crypto asset market, with the entire market capitalization of around $370 billion as of press time, only few wealthy investors are be capable of having an impact on the price of Bitcoin and in other digital assets immoderately.
Who are the ‘Bitcoin Whales’?
In many instances, Bitcoin whales are preceding Bitcoin adopters who have earned millions in cryptocurrency. Whales can also be risk takers with deep pocket individuals who lately discovered the cryptocurrency market as new way for making profits, or major institutional investors like hedge funds and proprietary trading desks that are nailing large bets on where the market will move next.
Only about 1,000 people own 40 percent of all existing Bitcoin, which means that there are some whales in a big ocean of little fish. This only means that the market is in bad condition, because if some of these whales start to sell large numbers of their Bitcoin holdings.
Mt. Gox bankruptcy trustee Nobuaki Kobayashi is a fresh example. However, he did not come to own large Bitcoin holdings by using the traditional route, but still, Mr. Kobayashi is considered a whale. Recently, he was able to sell 36,000 BTC in five lots between December 2017 and February this year. These transactions coincidently align with the drops in the price of Bitcoin.
Bitcoin whales traded on the biggest and most liquid Bitcoin exchanges, and some still do. The most impact of whales can be encountered in the altcoin market. Considering those crypto assets with market capitalizations of less than $100 million, the market will extensively change if a whale makes a decision to sell part of their portfolio, or if a large buyer enters.
For that reason, before you invest in altcoins, it is important to be mindful of the wealth distribution and watch over the order books to see if there are many whales.