We’re Continuing to Feel the Influence of Whales
Whales are a big problem in the crypto space in that they can heavily influence bitcoin’s behavior and increase its volatility. Whales are individuals who carry a lot of crypto in single accounts. Whenever they move this money, they tend to move much of what they own from one wallet to another. This causes the market to move up or down to such a degree that other investors will suffer.
Whales are widely considered to be “crypto rich,” often housing anywhere between 1,000 and one million bitcoins in a single account. One of the latest major stories to involve whales was one that potentially operated through the popular cryptocurrency exchange Bittrex. University of Texas finance professor John Griffin released a report explaining that such a whale was responsible for the massive price manipulation of bitcoin which occurred in late 2017.
It was this manipulation which caused bitcoin to spike as high as $20,000 in December of that year, but that kind of momentum can’t last, which explains why the currency suddenly fell to new lows in 2018. The report suggests that a whale holding serious bitcoin hordes through a Bittrex account may have been responsible for those 12-month long price swings investors witnessed.
In the report, Griffin explains what can make whales so dangerous:
The problem with a few large players holding crypto is that when they sell, they can easily push the price down, which makes the market susceptible to rapid swings.
Another big problem? According to crypto investor and writer Aaron Brown, whales are people that don’t like to stick around unless the market is performing well. Granted bitcoin continues to sink or suffers from a few other heavy drops along the line, he says that many are likely to sell off their stashes quickly, which could lead to permanent damage to the crypto space.
Are They Looking to Get Out Completely?
I doubt they would have infinite patience, and without significant growth in actual use, I would expect them to quietly withdraw to chase other promising technologies. They have no great financial or ideological commitment to either crypto or the ideals and technologies behind it.
There is also wide speculation that bitcoin whales are not individuals but rather institutions or companies that have sought to invest much of what they have in digital currencies or who are holding the stashes of multiple clients. Ventures such as Fidelity Investments are now offering crypto trading services to institutional players, which are seemingly making up a higher percentage of the digital trading community.