What Is a Crypto Whale?
A crypto whale is an entity that holds significant cryptocurrency, enough to affect liquidity and prices. Investors track whale activities because they can trigger price movements and volatility. Whales can cause market disruptions when dormant accounts become active, drawing attention from platforms like Whale Alert. Whales can affect liquidity by hoarding cryptocurrency, creating scarcity in active circulation. In addition, whales’ large transactions impact price by increasing or decreasing volatility.
Key Takeaways
- Crypto whales hold large amounts of cryptocurrency that can significantly impact market liquidity and prices.
- Whale activities are closely monitored because their transactions can create price volatility and market disturbances.
- Whales may hold cryptocurrency in dormant accounts, reducing the number of coins available for trading.
- Whales can influence blockchain governance by using their significant holdings to sway voting outcomes.
- Observing whale movements is crucial for investors, but activity does not always indicate market manipulation or selling.
How Crypto Whales Impact the Cryptocurrency Ecosystem
Large cryptocurrency holders are called whales because their accounts are much larger than the smaller fish (accounts) in the cryptocurrency ocean. Four bitcoin wallets owned 3.56% of all the bitcoin in circulation in August 2024 according to BitInfoCharts. The top 113 wallets held more than 15.4% of all bitcoin. There are thousands of accounts that hold less than 10,000 BTC that can be considered whales.
The crypto community and investors closely monitor these large accounts. Whale transactions are publicly reported on the Whale Alert website and its X account (formerly Twitter).
Fast Fact
Another term that has emerged is “crypto minnow.” These are wallet addresses that hold very little cryptocurrency compared to their whale counterparts.
How Crypto Whales Influence Cryptocurrency Liquidity
High-profile whale wallets can be problematic for cryptocurrencies because they concentrate wealth without moving coins. Whale accounts reduce a cryptocurrency’s liquidity because fewer coins are available for trade.
The community has identified many top Bitcoin whale addresses as exchange cold wallets, reserve accounts, or accounts holding stolen bitcoins. The top 113 accounts, holding over 10,000 Bitcoin each, control more than 15% (around 3 million BTC) of the circulating supply without frequent transfers. However, these accounts, many of which are exchanges, have less impact on liquidity than those holding between 100 and 10,000 bitcoins.
These accounts impact liquidity the most because they rarely transact. For instance, account 198a-g3Hi holds 8,000 BTC (approximately $476 million as of August 30, 2024). It started acquiring Bitcoin on February 22, 2009, and hasn’t had any outgoing transactions since.
The Role of Crypto Whales in Price Volatility
Whales can also increase price volatility, especially when they move a large quantity of cryptocurrency in one transaction. For example, the lack of liquidity and large transaction size can create downward pressure on Bitcoin’s price if an owner tries to sell their bitcoin for fiat currency because other market participants see the transaction. Other investors go on high alert when whales sell, watching for indicators that they’re “dumping” their holdings.
Crypto investors often look for the exchange inflow mean, which is the average amount of a specified cryptocurrency deposited into exchanges. If the mean amount of coins per transaction rises above 2.0, it is believed to mean that whales are likely to begin dumping if it correlates to a large number using the exchange.
The price is affected by both the inflow mean and the publicity surrounding a whale’s transaction. Bitcoin prices appear to respond to transactions involving large amounts of cryptocurrency when they’re publicly announced on X by Whale Alert or communicated by news outlets.
Governance Impacts of Crypto Whales in Blockchain
Some blockchains grant governance voting rights to cryptocurrency holders. If a whale has enough cryptocurrency, they could influence blockchain development, as votes are often weighted by holding size.
It is possible for crypto whales to influence changes in a blockchain that create more benefits for themselves or cause the blockchain to become less decentralized. This can affect that specific cryptocurrency’s market because it can make it more or less attractive to investors and users, thus influencing its price.
Why Crypto Investors Should Monitor Whale Activity
There are many circumstances in which someone with a large amount of cryptocurrency could move their holdings. It should be noted that movement doesn’t always mean a whale is selling off their holdings. They could be changing wallets or exchanges or making a large purchase.
Sometimes, whales may try to sell their assets in smaller amounts over an extended period to avoid drawing attention to themselves. They can produce market distortions, sending the price up or down unexpectedly. This is why investors watch the known whale addresses to look for the number of transactions along with their value.
What Does It Mean to Be a Crypto Whale?
A crypto whale holds enough of a cryptocurrency that it can affect the market.
How Many Bitcoins to Be Considered a Whale?
It depends on the market value at the time of the transaction. On Aug. 30, 2024, 1 BTC was worth $59,080.73. Some might consider an account holding 17 BTC a whale, as its total value that day was about $1 million. However, others might not consider that account a whale, preferring to use the term for accounts with much more value.
How Much Crypto Makes You a Crypto Whale?
The definition is subjective, and it varies depending on the cryptocurrency. Whales generally hold an amount of coins whose value could influence market prices and liquidity.
The Bottom Line
Crypto whales are capable of influencing market liquidity and prices, so it’s a good idea to pay attention to what the whales are doing if you’re a crypto investor. However, whale account activity doesn’t necessarily mean you should panic. Many whales are businesses that have invested heavily in cryptocurrency. These might be the whales worth observing if you’re going to whale watch. Keep an eye on the known whale addresses to track their transactions and values. They’re publicly announced on the Whale Alert website and X (formerly Twitter) account.
The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our warranty and liability disclaimer for more info. As of the date this article was written, the author does not own cryptocurrency.