A Forbes list last week published the 100 billionaires in the crypto world. The glamour granted to these neo autocrats of the crypto imperium created much buzz inside the crypto community. The ripple effect were even seen in mainstream media too where the new and easy riches of this emergent class of 1% generated a mystical aura around them.
This emergent class are categorized as Bitcoin Whales within the crypto community and are powerful enough to move the entire markets all by themselves. It is estimated that 40% of all the Bitcoin is concentrated in the hands of only 1000 individuals or collectives. However, there are also theories which dispute this number but that is an altogether different conversation. So who are these whales and how do they affect the markets.
Crypto enthusiasts can recount that a whale is someone, an individual or a collective which owns a huge quantty of a certain crypto asset say Bitcoin and can sometimes sway the market of these cryprocoins to his preferential price. These investors are around from the beginning of the cryptocurrencies and thus possess immense leverage and have profited most from this boom.
The analogy is drawn from the whales as they are the largest creature in the entire oceans and can dwarf the small fishes just by sheer immense of their size. Crypto whales such as Bitcoin Whales are similar to the ocean whales because their immense holdings can affect the small holders significantly.
If the circulation of the cryptocurrency is small and there is not enough liquidity, these whales possess immense leverage over the entire circulation. Some argue that Satoshi Nakamoto is the biggest whale as he possess almost 1 million Bitcoins. These are the stuff of urban legends in cryptocommunity.
They employ methods such as Rinse and Repeat, Buy and Sell walls, OTC markets and Dark Pools to sway the market in their favor in order to generate maximum profits. But they don’t always succeed as sometimes they are caught such as the event of “Infamous Bear Whale” in October 2014 when such an attempt was foiled by the Bitcoin community.
PS- We will follow this aspect in depth in a series on Whale investors.