Analytics often talk about so-called crypto whales, the owners of the largest wallets . It’s considered that crypto whales can affect the tokens’ value and shake the market. Is it actually true and should we really pay attention to them?
Crypto media titles often read: ‘Ethereum whales accumulated $407 415 040 in ETH in 10 days’; ‘Cardano whales accumulated 46% of ADA supply’; ‘biggest Shiba Inu whale returns’.
And so on.
Some say whales’ purchasing activity could be a sign of an upcoming price reversal.
But Ethereum’s founder Vitalik Buterin thinks that the biggest crypto holders are badly affecting the community as they can manipulate the price.
Should we believe them? Let’s make things straight.
What the crypto whales?
According to the World Financial Review, this term may be used to describe exchanges, corporations, or individuals holding very large amounts of Bitcoin.
But as we see the term also applies to big holders of any other tokens.
The platform also tells that whales are viewed with suspicion by the community because they are thought to manipulate the crypto price for their benefit.
So they are called whales because these holders can ‘disturb the crypto waters that smaller fish swim in’. That’s kind of metaphorical.
Mysterious Bitcoin founder Satoshi Nakamoto is clearly the first crypto whale as he owned something between 750 000 and 1 100 000 BTC according to his White Paper. With today’s prices that is as much as $55 billion, which makes Satoshi one of the richest people in the world.
Who can be considered a crypto whale?
There are no precise numbers, but the community thinks that those who own more than 1000 in BTC are crypto whales.
As for now 1000 BTC it’s approximately $39 million. So a Bitcoin whale is somebody who has $39 million worth of BTC.
And you can apply it to any other crypto.
So Ethereum whales should have at least 10 000 ETH. Solana whales should have at least 400 000 SOL and Dogecoin whales should have at least 300 million DOGE.
Let me not count it for Shiba, OK?
If Satoshi still owns all of his one million BTC, it means he has more than 5,2% of all current Bitcoin supply.
And according to the economic principle of Pareto, the top 20% of all BTC holders should have more than 80% of Bitcoin value in US Dollars.
There also was BitInfoCharts data that shows top 100 BTC wallets held around 18% of all Bitcoin valued at around $150 billion as of Q2 2021. Now, these wallets can own roughly one-third of all circulating BTC.
Do we know crypto whales’ names?
Given the fact that the Bitcoin network is anonymous, account holder names are hidden.
But the ledger has all addresses and transactions data. So you can see how many BTC some certain addresses have. And its transactions are also visible.
We can speculate that crypto exchanges can have access to the whales’ personal data as all customers have to verify their identity.
But it’s obvious that guys with more than 1000 BTC won’t hold their money on exchanges’ wallets. They would rather use some cold wallets.
Apart from mysterious Satoshi we certainly know such crypto whales as Binance founder Changpeng Zhao, FTX founder Sam Bankman-Fried, Winklevoss twins, and other richest people in crypto.
Why do whales concern the community?
As with everything in the world of capital, the concentration of wealth is also a problem for the crypto community.
The volatility of BTC or any other tokens can increase if the crypto whale moves a large number of coins at once. It can also increase if one address holds a large number of tokens for a while, lowering its liquidity.
Moreover, whales can sell their assets in smaller amounts over a longer period to avoid drawing attention to themselves. This process can produce market distortions, shaking the price up or down unexpectedly.
According to Binance Academy, most whales don’t trade on conventional crypto markets, as the large orders could overwhelm the volume available on the order books.
Instead, whales are buying and selling their coins off the exchange books, what is known as Over the Counter (OTC) trading.
Whales also have a lot of power inside tokens based on the Proof-of-Stake mechanism, as they can influence key decisions within blockchain development.
How have whales already affected crypto?
In February 2021 the ETH price dropped more than twice – from$1628 to$700 – for a single minute on the Kraken crypto exchange.
Actually, a lot of factors impacted this. But Kraken CEO Jesse Powell said that it was a single whale who “decided to dump his life savings”, thus resulting in the plunge.
Last May Vitalik Buterin also emptied his public wallet which caused some panic inside the community. But then it appeared that he just moved his tokens to a cold wallet.
And some big companies are also making moves that sometimes look as if crypto whales are manipulating the market. For instance, a year ago Tesla automaker announced its $1.5 billion BTC purchase. That caused the Bitcoin price to soar by 15%.
For now, MicroStrategy company has more than 125 000 BTC which is nearly $5 billion. Any statement from its CEO Michael Taylor can somehow affect the market, not to mention tokens movements.
But if you think that the crypto market is so volatile that any public statement can affect it – just remember how Musk got the SEC penalty for his tweets. Or how Saudi Arabia leaders’ jokes caused the 1973 oil crisis.
Are crypto whales criminals?
According to the Chainalysis report, crypto criminals accounted for 3.7% of all crypto whales in 2021.
Overall, 4068 criminal whales were identified in the report holding over $25 billion worth of cryptocurrency.
In fact, those aren’t the big numbers in comparison with illicit activities in markets like drugs, weapons, or human trafficking. But still, it is a fact that around 1400 criminal whales received 90-100% of their total balance from illicit addresses.
“In fiat, the highest net worth criminals have murky networks of foreign banks and shell corporations to obfuscate their holdings. But in cryptocurrency, transactions are saved on the blockchain for all to see,” the report says.
In 2021 crypto laundering had jumped 30% to $8.6 billion. This is the second-highest number in five years.
So thinking about these people having more power inside the blockchain is really frightening.
But hopefully, they are only a few percent of all crypto whales.